Retirement is supposed to be a time of relaxation, enjoyment and fulfilment after 40 years of hard work, paying taxes and doing your bit for society.
Yeah right!
For a majority of Kiwis (over 85%), the dream of a comfortable and financially secure retirement remains elusive. Add the decreasing amount of superannuation, cost of living rises and longer life spans, and the retirement dream is out of reach for more and more retirees. This alarming trend, which is a global concern, highlights the clear and present need for everyone to start planning towards securing their financial future as early as possible.
In fact, when you first start earning an income – that is the time to start investing in your future.
How Come So Many Kiwis Are Unprepared For Retirement?
There are a number of reasons why so many Kiwis find themselves unprepared for retirement (at the current retirement age of 65).
Here, we look at the main causes (and what you can do to mitigate these and get onto a pathway that sees you achieve financial independence at or prior to retirement):
The Absence Of Financial Literacy Education In School:
One of the primary reasons why many Kiwis find themselves unprepared for retirement is the absence of a firm understanding about wealth creation and personal financial planning from an early age.
We certainly strive and are encouraged to learn subjects and acquire skills that provide us the opportunity to do jobs well; however, most of our younger generation are inadequately prepared for combating the financial challenges that face us in the modern world.
Whereas we can and do develop ourselves into good, employable individuals, we are not training ourselves to look after our own financial wellbeing.
The basics of personal financial management should start at school.
An Over-Reliance On Jobs/Employers:
Our modern society is built on the premises set in the great industrial age of the early part of the 20th century and has continued to today; we are still mostly reliant on acquiring skills to get jobs and then slowly moving up the career ladder, while paying our taxes, getting married and raising children, all supported by the income from the job we hold so dear.
Through this process we become more and more dependent on our employers and the government to look after our financial wellbeing.
Conversely employers and business owners are largely concerned about company profits, and employees are by and large, considered an expendable resource, who can be sacrificed on the altar of profitability.
Look at what recently happened to TVNZ 3’s News Hub and current affairs team!
Dismantled and being made redundant, despite having served the company for many years with passion, blood, sweat and tears.
The moral of this story is not to be totally reliant on your employers for your future financial wellbeing.
You can and should create your own `parallel’ wealth creation strategies, while you work.
Over time, if you have invested well, you can become financially independent and will not need to work for an employer ever again.
The team at Home Advantage has helped over 1,600 of our towards this goal through our 3-step process:
A Reliance On Government Pension. Another contributing factor to the retirement savings crisis is the reliance on government pension schemes as the sole source of retirement income.
While the government superannuation scheme helps towards your retirement, it is by no means enough to help you live a comfortable life in retirement.
Looking at the average cost of living in New Zealand and the current government’s present superannuation payments shows a shortfall of -$384 per week:
The average cost of living for a couple in NZ? How much is the government superannuation for a couple?
$ 1,201.70 per week $ 817.32 per week
Per Week Over 10 years Over 20 years
Short Fall: -$ 384/- -$ 199,877 -$ 399,755
This shortfall balloons to -$ 400,000 over 20 years of retirement (the current average life expectancy in New Zealand is between 80-85).
And this is expected to become worse as we, like many developed countries, have a net ageing population (meaning there are more people reaching retirement vs. new taxpayers to pay the super bill!).
So, please do not rely on your pension.
It may have been adequate in the 1930s when it was being rolled out in the industrialised world, but it is going to be a pittance in the coming years.
Inadequate Savings/Investment Culture.
A culture of inadequate savings and excessive spending prevails among many Kiwis, making it challenging to accumulate wealth over time. High living costs, mounting debt levels and a lack of financial literacy contribute to this phenomenon. Without a disciplined approach to retirement planning, saving, and investing, individuals and couples may find themselves ill-prepared for retirement when the time comes.
This is why proper education and planning is a must for people who want to be financially stable. Taking care to research your opportunities and getting help and guidance from a professional financial adviser can significantly help you improve your finances. Depending on your lifestyle, you should aim to prioritise savings and investments as much as possible for better future outcomes.
Taking Action Now To Better Your Future
So, what can you do now to ensure you have a happy retirement?
Knowing your current position and the direction you are heading in is an essential starting point.
We at Home Advantage offer a free assessment to look at these two aspects i.e. of your situation:
- Where are you now/what is your current financial position?
- Where do you want to go/what are your personal financial goals?
Once we make this assessment (also called a `Financial Health Check’) we can help you create a personalised plan to help you get onto the pathway that helps achieve your goals.
Without knowing your current position or future goals, you will end up nowhere.
Here at Home Advantage, we want to help you plan for your future. Our services include financial planning and advice, wealth creation and protection and much more. We strive to help our clients find their way towards financial independence, and we’d love to help you as well.
If you’re ready to speak to us, please feel free to call our team on +64 27 522 5682.
With Home Advantage, you can enjoy a more secure and financially sustainable life.