KEY POINTS:
Q. I am a 55-year-old Kiwi who has his entire retirement savings of US$100,000 in the United States on short-term bank deposits earning a much lower rate than in New Zealand. I have a job and a mortgage-free house, so I do not really need the money until I am 65. Should I bring it all over now, taking advantage of the 8.2 per cent bank term deposits, or leave it in the US, hoping that the New Zealand dollar will come down in the next 10 years?
If I converted it all now, at around 69c, how many years would the bank interest rate have to stay at let's say 7 per cent to equal an exchange rate of say 65c or 60c?
A. You're juggling three numbers here: the exchange rate between New Zealand and the US; interest rates here, and interest rates there.
The maths can get pretty complicated. And it's not clear that an answer would be helpful anyway. There's no knowing what will happen to any of those three numbers.
For example, you're hoping that the NZ dollar will continue to drop relative to the US dollar. I suppose more people are guessing it will fall than it will rise. But guessing is all they are doing. Exchange rate forecasts are notoriously iffy. And interest rate forecasts aren't much better.
Given the large difference between local and US interest rates, and the fact that you will need the money here in 10 years or so, I suggest you start to move it now.
To avoid disappointment if the kiwi dollar does in fact fall considerably later, why don't you transfer, say, US$20,000 now, and US$20,000 more every two years? Or, if that's too much hassle, move a third now, a third in five years and a third in 10 years.
At the end of the process you will wish you had moved it here either faster or more slowly. But at least some of the money will have been in the right place at the right time.
With any other strategy, you might win with the lot but you might lose with the lot. Gradual transfer is lower risk.
The other advantage is that, once you've made your plan, you can stop worrying about it. Whatever happens to the dollar or interest rates, you can shrug and say, "At least I'm partly winning from that change."
Q. I am 63 years old, retired, and am not yet in KiwiSaver but will join when I sort out the options.
Regarding lump sum investment: I could pay $100 per month by direct debit or make a one-off annual payment of $1200.
Would I still get the $1040 "tax credit" with the one-off payment, and, if so, would it matter when it was paid in?
A. You would still get the tax credit - which matches your contributions up to $20 a week or $1042.86 a year.
And after your first year of membership, it doesn't matter when in each July-to-June year you make that payment.
But it does matter in your first year. The maximum tax credit is proportionate to how much of that year you are eligible. If your tax credit start date is halfway through the year, for example, your maximum credit would be $520.
The Government has at last finalised the rules about this, as follows:
* If you join KiwiSaver via an employer, your tax credit start date is the first day of the month in which KiwiSaver contributions are taken out of your pay.
* If you join via a provider before October 1 this year, your start date is the first day of the month in which you sent in your completed membership form - as long as you make at least one contribution of any size by October 31. This applies to employees and non-employees.
* If you join via a provider from October 1, 2007, onwards, your start date is the first day of the month in which your provider receives your first contribution. Again, this applies to employees and non-employees.
* If you are an employee as well as self-employed and you join via an employer as well as via a provider, your start date is the earlier of the two dates.
Getting back to our correspondent - as a non-employee, you'll be joining via a provider, so the sooner you get that form in, the better. For more detail, see next Q&A.
Note, though, that if you don't want to contribute much until next year, you can join KiwiSaver now and make just a small contribution at first, adding more later - as long as your provider will accept that.
Note, too, that the above rules are set out in a taxation bill currently before Parliament. I suppose we can assume it will pass.
Q. I read your article on getting in quick for KiwiSaver perks, went out and bought your excellent guide and ordered the investment statements. I am self-employed and want to make annual one-off payments of $1040, as you suggest.
Although the brochures say "Tomorrow begins today", this seems optimistic. No payments into the ING fund are possible until October 1, 2007.
Indeed, according to the IRD guide for the self-employed, all contributions to any scheme have to be paid through the IRD until October 1. The other schemes I looked at did not even allow for one-off payments.
Getting in quick seems impossible. Given that the self-employed have to apply directly to the scheme providers, how can they get the maximum government contribution for the first year if they can't join until October 1?
A. You can join KiwiSaver at any time via a provider. It's just that they can't take out any money until October.
But as long as at least one deduction is made by October 31 your tax credit will be calculated from the first of the month in which you join.
Make sure, then, that the vital October contribution is scheduled to happen - which will probably be the case with most providers.
If not, or if for some reason you want to contribute before October - or for that matter at any other time - you can do so directly to Inland Revenue. The easiest ways are through a Westpac branch or via internet banking, following the instructions on your bank website for "tax payments" or "IRD payments".
Inland Revenue will know which provider to send the money to in October, because of the IRD number system.
You might want to contribute a small amount via Inland Revenue just once. Then you can set up an automatic $1042.86 contribution to your provider as late as June next year and every subsequent June.
By the way, I hope you don't feel misled about the suggested one-off annual payment in my KiwiSaver book.
When I wrote that, there were no apparent rules about tax credit start dates. Several government officials read my manuscript and nobody brought up the issue.
It arose later - as have many other aspects of KiwiSaver. That's what happens when something this complex is introduced hastily.
One more point: ING is not the only provider that will accept one-off payments. Another I know of is SuperLife. Any other providers out there who let me know by next Wednesday will be listed in next week's column.
Q. I have heard you and others say employees should join KiwiSaver as soon as possible in order to get all the Government's $20 per week tax credit, or else they are giving up the $20 a week while they are not enrolled.
I am paid monthly so my employer won't be deducting anything until the end of the month although she has my completed KS2 form.
Will I still get the government tax credit for the first weeks of the month even though I have not yet made any contributions?
There may be others on fortnightly wages or even longer periods (maybe three months) who might also be wondering about this issue?
A. You'll be OK as long as your employer makes your first contribution within the month. You might want to check on that, and speed it up if necessary. Or you could make a small extra contribution directly to Inland Revenue.
Note, though, that it's not all that big a deal if you miss out on one month's tax credit. It amounts to about $87.
Sure, that's a nice dinner for two. But it's not worth getting upset over. In the years to come, you'll get lots more where that came from.
More Kiwisaver info
For more on the tax credit start dates, including different scenarios from Inland Revenue, scroll to the bottom of the KiwiSaver book page on www.maryholm.com. The page also includes basic information about KiwiSaver.
Other sources of info: Check out the Retirement Commission's website, www.sorted.org.nz or the Government's www.kiwisaver.govt.nz. Alternatively, call 0800 KiwiSave (0800 549-472) Monday to Friday 8am to 8pm, or Saturday 9am to 1pm.
* Mary Holm is a seminar presenter, author and publisher. Her website is www.maryholm.com. Her advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to mary@maryholm.com or Money Column, Business Herald, PO Box 32, Auckland. Letters should not exceed 200 words. We won't publish your name. Please provide a (pref daytime) phone number. Sorry, but Mary cannot answer all questions, correspond directly with readers, or give financial advice.
