How to Plan for Retirement

The retirement gap is growing and 65% of Kiwis are worried about having enough. How can you avoid being one of them?

A recent survey by the Financial Services Council titled KiwiSaver at a Crossroads revealed Kiwis are concerned about affording retirement. It showed around 70% of NZ adults think they may need to work past retirement age. Even more concerning, 65% are worried they aren’t on track to have enough money to enjoy the retirement they dream of, or to be able to afford where they want to live.

These are worrying statistics. Kiwis are known for their can do, hard work attitude. So, after years of toil most people look forward to enjoying a more relaxed pace of life not beholden to the boss, deadlines and the clock. Many of us dream of the retirement we want to live, which could include travel, time with family and friends, leisure pursuits like golf and bowls and more time for community and charity work. But the reality is quite different, with the research revealing 70% of NZ adults think they’ll still need to work past the standard retirement age of 65 rather than kicking back and enjoying their golden years.

For many of us it is difficult to know exactly how much you need to have saved to fund your retirement years. How much is enough? Massey University regularly produces a report called the New Zealand Retirement Expenditure Guidelines which shows the cost of living in retirement for a one-person and two-person household in both metropolitan (Auckland, Wellington, Christchurch) and provincial areas of New Zealand. It provides for two kinds of retirement lifestyle, ‘No-Frills’ i.e. the bare basics and ‘Choices’ which is not lavish but includes a few extras like the odd restaurant meal and a bottle of wine in the supermarket trolley.

The latest report, dated June 2021, showed household expenditure for a two-person household in a metro area costs $864.94 per week for a no-frills lifestyle; and $1,470.26 for a choices lifestyle. Standard NZ Super for a couple (where both qualify), is $672 per week. This doesn’t even cover a no-frills retirement, let alone the extras we’ve all spent our working lives dreaming of! And that gap is growing.

So how do you close the gap? And how do you achieve the retirement nest egg to fund the retirement you’ve dreamed of? The Massey research suggests a two-person household living in a metro city would need to save $809,000 to fund a choices retirement, and $511,000 if living in the provinces. And that is after accounting for NZ Super payments.

As with many things in life, we need some help and guidance to set us on the right path and keep us on-track. When it comes to retirement savings it’s important you have a goal, and know what you need to do to achieve it. Think of it as your roadmap to retirement. No different to setting off to an exciting new holiday destination. You choose where you want to go, and you follow the map to get there. Without that you either end up in the wrong location, or totally lost!

One way to set and reach your retirement goals is to seek advice. There are many available sources of advice, including plenty of family and friends, but we’d suggest you stick to choosing a professional to help you. Whether it’s a Milford Adviser from their KiwiSaver or Private Wealth team, an independent financial adviser in your community, or one of the online advice tools (referred to as robo or digital advice), they can help you to set your goal and create the right plan to achieve it.

Further research by Financial Services Council in 2020 titled “Money and You” showed New Zealanders who do get advice save more, invest more, travel more and overall have improved wellbeing. It also showed those who seek advice have KiwiSaver balances over 50% larger than those who don’t and have greater peace of mind and confidence in making financial decisions.

Even Milford’s own research of those who have used the Milford KiwiSaver Plan Digital Advice Tool showed that 88% of respondents said they now feel more confident about being on track towards their KiwiSaver goal.

If you don’t have a savings goal or aren’t sure if you will achieve the goal you’ve set, then Milford’s Digital Advice Tools can help, or they can put you in touch with an Adviser.

Don’t be one of the 65% of Kiwis who are worried about affording the retirement they dream of. The sooner you make a plan and set off on the journey the better the destination could be.