How much do you actually need to retire?

how much do you need to retire
How much do you need to retire?

Do you know how much you actually need to retire?

While we all know that we can fall back on our NZ Super and receive just enough to meet the most basic costs of living, if we want to maintain our current lifestyles and enjoy travel, among other things, we need to start saving for retirement early and ensuring we put extra away.

Whether this is through the KiwiSaver scheme or a combination of investments, we’re going to examine how you can save for retirement.

We’re going to start retiring much later than 65

With an aging population and increasing life expectancy, the current average retirement age of 65 may increase in the next few years.

While we’re living longer and longer, our birth rates are decreasing with less than 2 children per family on average. This compared to an average of 4 children per family in the 1960’s and we can rest assured that we’re probably going to be working well into out 70s.

How much will I need to retire?

In order to enjoy an abundant retirement in New Zealand you would need about $450,000 for a couple or just over $300,000 for a single individual. That being said a more modest retirement can come in at around $50,000 for a single individual and around $80,000 for a couple.

Being honest about what you will need

Sitting down and crunching numbers right now is exactly what you need to do to ensure you know how much you’re going to need for both yourself and your spouse.

There are no shortcuts when it comes to retirement savings and although it seems like just one of the million things we need to think about and fork out cash for, this is one that you’ll thank yourself for thinking about later.

Extra “wants” will require extra cash

Want to travel the world? Keen on enjoying a hobby you’re too busy to enjoy right now? If there are any additional wants and plans that you may have you have to include the costs of these into your retirement savings plan.

Many people focus on basic living costs and forget to take into account additional expenses and costs incurred from doing things that they want and love to do. Think about what you want and work your way backwards from there.

What will I get from my NZ Super?

How much you get from your NZ Super will depend on your individual circumstances but, generally speaking you’re looking at about $21,000 for individuals and $31,000 for couples – by no means an amount that will afford anyone a luxurious retirement but, this is where KiwiSaver comes in.

Taking advantage of KiwiSaver

KiwiSaver was introduced to help people put away enough money to retire comfortably and boost their NZ Super pension plans. Whether you are employed formally or self-employed you can join the scheme and benefit from it.

It is a completely voluntary retirement savings scheme that you can make regular contributions to while your employer also contributes at least 3% of your gross pay and the government will also make a small contribution too of just over $500.

KiwiSaver providers in New Zealand:

  • AmanahNZ KiwiSaver Limited
  • AMP
  • ANZ Investments
  • Aon New Zealand Ltd
  • ASB Group Investments Ltd
  • Booster Investment Management
  • BNZ
  • Civic Financial Services
  • Craigs Investment Partners Superannuation Management Limited
  • Fisher Funds Management Ltd
  • Fisher Funds Management Limited
  • Generate Investment Management Limited
  • Kiwi Wealth Limited
  • Koura Wealth Limited
  • Medical Assurance Society NZ Limited
  • Mercer (NZ) Limited
  • Milford Funds Limited
  • New Zealand Funds Management Limited
  • Nikko Asset Management New Zealand Limited
  • NZ Anglican Church Pension Board
  • Pathfinder Asset Management
  • Pie Funds Management Limited
  • QuayStreet Asset Management Limited
  • SBS Bank
  • Simplicity
  • Smartshares Limited
  • Summer
  • SuperLife
  • Wespac

How much of your gross pay can you contribute?

You can choose how much you wish to contribute and this is worked out as a percentage of your before tax salary or income. This can be 3%, 4%, 6%, 8% or 10% based on your individual goals and retirement plans.

If you join late and are aged over the age of 60 you will have to wait for a period of 5 years from the date of joining before you can use any savings in your KiwiSaver account.

Also worth mentioning is that those who are self-employed are not obliged to join but if they choose to they can choose how much they want to contribute.

Other options to fund an abundant retirement in New Zealand

Using your home to fund your retirement by downsizing

Most New Zealanders who are approaching retirement age would have paid off their mortgage and be able to downsize their home to free up cash for enjoying an abundant retirement.

Those who have not paid off a mortgage and have no property to fall back on should have, at the very least, saved more during their days of renting.

Investing your money for bigger returns to fund your retirement

Term deposits & compound interest

Term deposits are one of the better savings options available and will allow you to put a little extra towards your retirement while enjoying the benefits of compound interest. The power of compound interest lays the power of time. If you choose to play for the long term, you will certainly benefit from a term deposit.

Peer-to-peer lending platforms

You can also look for other investment option such as investing money in peer-to-peer lending platforms like Lending Crowd, Harmoney and Squirrel which offer returns which exceed those offered by savings accounts.

Funds & bonds

This form of investment carries a higher risk but may provide higher returns which may be exactly what you need to boost and maximise your retirement savings. If you don’t have any experience it is always advisable to invest by using the services of a fund manager or investor.

Stay away from risky and difficult investment options such as cryptocurrency. The last thing you need is to lose your hard earned money and have a huge shortfall to make up for.

For those that are trying to find ways to make up for a lack of retirement savings, taking on risk may be necessary but may end up making things worse so always carefully consider all of your options and taken on a level of risk that you are conformable with.

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