Life has a funny habit of speeding up once you get through your forties and fifties and before you know it, 65 and retirement can be staring you in the face – with all the exciting possibilities it represents, once you’re freed from the shackles of work. However, if you haven’t done some pretty thorough planning beforehand, those golden years might not be all beer and skittles. Bear in mind that the new government might conceivably raise the age of retirement to 67, which will undoubtedly move the goalposts for many Kiwis.
What can go wrong?
The retired people who experience difficulties are generally those who haven’t had the means to save a retirement nest-egg therefore needing to live on the state-funded pension. With variations according to your tax bracket, at $916.36 per fortnight (gross) for a single person without a dependent child, and $763.64 per fortnight (gross), for each person in a two-person household (depending on certain circumstances) you can easily do the sums and see that this actually equates to an extremely modest annual income.
By the time you take out housing costs, food and utilities it’s very likely that you’ll be struggling to stay afloat, or even negotiating negative territory.
Is there any good news?
Well, if you own your home, are free from debt, and have at least some savings put away you’re more likely to be OK in retirement, so that’s the positive stuff.
However, the events of the past few years – including rocketing house prices – followed by soaring interest rates – have seen first-homers buying later and taking out longer-term loans which means that many of us could still be paying back a substantial mortgage – even as we get to our mid-sixties and early seventies: Ouch!
Ideally, how much should I – or we, try to save for retirement?
The latest New Zealand Retirement Expenditure Guidelines which are released annually by Massey University, paint a less than rosy picture for many Kiwis. RNZ recently reported that based on current costs, a two-person household will need $831,000 put away for a comfortable retirement in the city and $539,000 for a comparable quality of retirement in the provinces. Meanwhile, the report continues, a couple living a simpler life in the city will still need $235,000 extra, while a rural retirement will cost $120,000 – on top of super payments.
OK, where should I start then?
It goes without saying that signing up for Kiwisaver is practically a no-brainer – and the sooner the better, even if it feels like a stretch at the time. The beauty of the scheme is that you are free to choose the level of your own contribution – ranging from 3% to 10% of your gross (before tax) salary, then your employer needs to contribute 3% too.
You’re free to choose your own KiwiSaver provider (and to change if that provider isn’t sufficiently filling your needs). Even at the moment, while we’re experiencing a less than inspiring financial environment, the speed at which your savings may potentially build can still be quite impressive. What’s more, you can also choose between five basic investment types, depending on age, life-stage and your appetite for risk, which can make the whole process of saving quite satisfying – or thrilling, even!
Where can I get good advice?
At Money Empire we’re all about helping our clients prepare for the future – we genuinely want to see you looking forward to a consistently satisfying quality of life.
There are quite a few ways in which we can assist in guiding your finances – enabling you to save more – even during tough times. Perhaps we can help you find a mortgage that’s better suited to your needs – or shop around on your behalf to reduce those sky-high insurance premiums. Our team is always very happy to get together with you for a coffee and a chat about your own unique circumstances.