How much do you need for retirement?

Money Empire Blog Header How Much Do You Need For Retirement?

Written by Money Empire

March 14, 2022

Retirement is either at the top of your mind, because you’re approaching it, or you’re so far away from it that you barely register even hitting the ripe, young age of 65. KiwiSaver was introduced on 1 July 2007, a huge blessing for our country so focused on using property and funds, as the core focus is retirement and first home buying. 

Alongside the pension, KiwiSaver, your savings, any additional investments, and any other means of income will be your only source, as you will not be working anymore!

What do you get when you retire in New Zealand?

Let’s strip it back and talk about the different options available to you if you are 65 or over. 

  • The NZ Super (a pension from the Government) individual or couple
  • Access to KiwiSaver if you have funds
  • Any remaining net wealth, property, savings, shares, rental income (which you can access at anytime)

How much do you need for retirement?

We reckon the average person wants to retire comfortably between $80,000 – $100,000 a year, enough to travel and live an easy-going lifestyle, but ultimately it does depend on individual wishes. Considering the average life expectancy is about 82 years old in New Zealand, that means by the time retirement age comes around, you will need to have this all on hand ready to take you across the next 17 years (including any passive income, dividends, or investments) – which is crazy! 

If your costs have gone up by $8000 a year, it can be scary to think of reality without income.

Kiwis are spending an extra $4000 – $5000 a year on basics, if they’re renting in retirement, renting is going up $2600 per annum, the average car for $20 petrol will take you 40km less.

There’s a lot to take in!

Work out per week what you need to live off – mortgage, rent, food, insurance, discretionary costs, and then luxury costs and if that totals $1000 a week, you need a minimum $52,000 a year to cover that. Where does it come from? Pretty much anywhere you have invested time and money.

What do Kiwis live on for retirement?

We are assuming (and hoping) by the time people are at retirement age, their mortgage is paid off and have settled all their debts, so the main outgoings would just be the necessities for living and any other fun activities. The current NZ Super rates after tax are $437 a week ($22,721 a year) if you’re single and living alone, or $672 ($34,955 a year) for qualifying couples. 

After doing some research, the current state of affairs for New Zealanders isn’t looking too crash hot. 

  • Average KiwiSaver balance: $26,410
  • Average savings: $3000
  • Pension per week for a couple: $672

All of these combined remains not a lot to enjoy, especially if you’re renting in the city. It can make affording the basics really tough, which is why so many Kiwi’s have leaned on property as a tangible investment to pay down on any debt and secure their financial future. We have seen a few websites put together a “no frills” lifestyle option, which doesn’t seem like the most fun or easy way of enjoying the freedom of a work-free existence. 

How to prepare for retirement in New Zealand?

It seems a lot of people don’t realise how much income they receive from their employer. To prepare for retirement, there are a few steps to undergo well before you find yourself there. 

  1. Check you are contributing the right amount to KiwiSaver. 
  2. Pay down your debt.
  3. Get insurance.
  4. Build up a safety net/emergency fund outside of your savings.
  5. Sort out a defined budget.

Speak to a specialised KiwiSaver adviser well before you head into retirement to make sure this investment is in a perfect position for you to take out by the time retirement hits. They will be able to help figure out what works for you based on your risk strategy. 

Everyone, in general, should seek to pay down their debt! Having debt means you are in the negatives, which means having no debt gets you at ‘figure 0’, an ideal place to be so your expensive outgoings are limited. 

Insurance is the foundation to future-proof you, and will really come in handy (especially at an older age) when protecting and preserving your wealth. 

The savings and nest egg you have built up over time should be kept for you to enjoy, creating a separate emergency fund keeps those savings intact. 

Defining a clear budget helps more than hinders, you know your exact outgoings and costs as well as any incomings going forward. 

Our financial advisers’ thoughts on retirement? 

Look, we know a lot of people don’t think about retirement. One of our financial advisers, Lisa Barton, sees her clients with minimal investment or long term savings strategies. Her plan for retirement? She would love some passive income from rental properties, and be able to live a well balanced lifestyle and support her kids!

Rosy’s goals are to have two properties in tourist locations in NZ so that she can do house swap and travel abroad with free accommodation. In addition, have 2 rental properties providing her with passive income. “I have seen a lot of people who have not considered retirement planning as imperative and in the later years of their life they’ve suffered from not having financial freedom, and ends up being quite dismal in the end really.”

Goran’s goals for when he retires? Hopefully retiring by 60 (which is only 23 years away!). Some of the core goals (and there are a lot) are: Property portfolio of 10 minimum that service themselves and provide a stable income, with some commercial properties in there and a bach to retreat to. A nest egg of cash to be put away and invested, and have some back up cash in case of any procedures. Have the ability to help our kids and grandkids with any funds they require for home ownership, and of course own a couple of classic cars to enjoy. I want to do as much travel as possible if allowed at that point in time as don’t know what the world is going to be like. A little different than the usual above money driven retirement plans but be a part of a charity or fundraising organisation that raises funds for a particular cause (Starship for example or Child Cancer Foundation). As a side note my mum and dad will be mortgage free next week after buying their home in GI for $180k back in 2001 which is crazy. They have plans to retire in a year or two (dad is 69 and mum is 66).

For everyone, their plans for retirement vastly differ based on how well they have prepped! Want to plan your financial future and not sure where to start? Get in touch and let’s see how we can work together.

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