How much you need to have saved or invested for retirement is never straightforward. As you can imagine, the answer is unique to every person as it depends upon factors such as the lifestyle they wish to lead in retirement and what access they will have to investments to fund their desired lifestyle.
However, no matter your current position, it is best to tackle retirement planning sooner rather than later – leaving it until your mid 50’s may well be too late. Below we take a look at what the average Kiwi’s retirement may look like and the level of savings or investments they need to have established at retirement.
As previously mentioned, retirement lifestyle is the number one variable to consider. Do you want to be living in a freehold home or will you be happy renting? Do you want to travel regularly and spend money on entertainment?
Most retirement planning specialists work with a rule of thumb that you will need approximately 80% of your pre-retirement income if you want to maintain a comparative lifestyle. With the average income for a 60 to 64-year-old Kiwi being $60,736 per annum, you would need to approximately $48,589 per annum. Should you qualify for NZ Superannuation, this could provide you with roughly $20,800 or $16,016 per annum depending upon your living situation i.e. living alone on in a partnership.
As you can see in the above figures, NZ Superannuation will not be sufficient to maintain the average Kiwi retirees desired lifestyle from the age of 65. This will leave many having to consider working beyond the age of 65, reducing their retirement lifestyle expectations or relying on other means to generate an income. For many, there will be access to KiwiSaver upon retirement. However, additional savings or investments will be needed above and beyond KiwiSaver.
As an example of what the average Kiwi may need to have saved to retire, should you wish to generate an additional $40,000 per annum for 20 years from investments, which provide an average net return of 3%, you would need an asset base of approximately $600,000 (assuming you do not wish to have any capital remaining at the end of 20 years).
The above may be a daunting figure to comprehend which is why many do not deal with the issue head on. And what can be even more daunting is the fact that the costs of living tend to be steadily increasing – so in reality you may need access to more funds than what you initially budgeted. However, with a little help and discipline it is not unachievable. This is where Home Advantage can step in. Our team of advisers can coach you through the retirement planning process, explain your options and opportunities, and help you come up with a sustainable plan that works with your life as it is now.
We are extremely passionate about ensuring that Kiwis get to enjoy the lifestyle they want when they retire, because after all, isn’t that why you have worked so hard?
If you would like help with any aspect of retirement planning, please feel free to book a complimentary in-home consultation so that you can speak with one of our retirement planning experts.