Insights
Do you know your number?
Do you know how much you need and how much you'll have when you retire?
Small changes now, can make a big difference later
Do you know how much you need during retirement and how much you'll have saved by then? That's your “retirement number”.
This crucial figure helps you assess the financial trajectory of your retirement. And, let's face it, the sooner you determine it, the sooner you can make adjustments if you’re not on track. Taking small steps now can make a big difference later to your balance and your wellbeing.
Your KiwiSaver offers a unique approach to long-term investing as it combines your contributions with those from your employer and the government. All of these contributions, benefit from compounding returns over time. However, the actual amount you'll need in retirement might be different to the amount you’ll have in your KiwiSaver.
Let’s put a positive spin on retirement by thinking of it as your 20-year holiday and start planning for it now by thinking about five simple questions: -
1. Your best guess at how long will you be retired for?
2. When do you plan on retiring? (Not everyone wants to wait until they are 65 before they take their big holiday).
3. What activities do you see yourself doing and how much will they cost?
4. How much will you need and are you on track to have enough?
5. What can you do if your projected retirement income is not quite as healthy as you thought?
No matter where you are in life, we’re here to help you reach your retirement goals. Dive in to discover easy ways to answer these key questions. We’ve included handy links to see how your KiwiSaver could grow over time, estimate the amount you may receive from the government and find simple strategies to plan your retirement. We’ve also included some cool podcasts. Let’s make sure you’re set for an amazing future.
1. Your best guess at how long will you be retired for?
Kiwis are living longer. This positive trend can be attributed to technological advancements, a better standard of living, and an increase in healthcare availability [3].
Currently our average life expectancy at birth in New Zealand is around 82 years. Life expectancy for women is 84 years, compared with 80 for men. [2]
So, it’s a good idea to factor in how long you could live for - it may be longer than you think.
2. When do you plan on retiring?
The government will start paying your NZ Superannuation at age 65. But whether you retire at this age is up to you. Here are some options to think about: -
Retire early: you may have ways and means to not have to wait until you are 65. Check out the trendy FIRE technique if this appeals to you.
Retire at age 65: This is the official retirement age (when you’ll receive your NZ Superannuation)
Keep working past 65: full or part time, working past age 65 this is a great way to supplement your income and may also help your wellbeing as you adjust to this new phase of life.
Thinking about these options will help you work out how much you will need and when.
3. What activities do you see yourself doing and how much will they cost?
Do you want to travel the world, take up a hobby or educational course, donate your time or spend it with family? Thinking about how you might spend your time, remembering that your energy levels and physical wellbeing may change as you get older, can be useful towards your planning. We’ve created an 'Ultimate Design for Retirement' worksheet to help. Download it here.
4. How much will you need and are you on track to have enough?
Firstly, use the Sorted KiwiSaver calculator to see what you have now and how much that will equate to later. Are you happy with the amount you will have at age 65? What difference will it make if you alter your contributions? What difference will it make if you alter your fund type?
Pop the amount you think you can achieve into the Retirement Calculator to see what you will end up with each week in retirement once combined with predicted government superannuation payments (net of tax, inflation and fees) and any other assets or income you may have.
Secondly, it’s worth knowing what you may expect from the government and how much you’ll need to budget for.
The Retirement Calculator is based on current NZ Superannuation rates on the M tax code at 2% inflation. How much you will actually receive depends on your living situation, if you are with a partner, your tax code and changes in inflation. The government Work and Income website breaks it down for you. Please note this is based on today’s amounts, not necessarily what you can rely on in the future.
You’ll see you can choose a ‘no-frills’, ‘choices’ or ‘set your own goals’ budget which will be based on the activities you see yourself doing. This chart shows what you could expect from the government vs a ‘no frills’ or ‘choices’ budget. The difference would of course need to come from your savings, sales of assets, or other investments including your KiwiSaver.
| ONE-PERSON HOUSEHOLDS | TWO-PERSON HOUSEHOLDS | |
|---|---|---|
|
WEEKLY NZ SUPER RATES After tax |
$496.37 | $763.64 |
| Total Weekly Expenditure | Metro / Provincial | Metro/ Provincial |
|
No Frills budget |
$826.26 / $689.54 | $982.02 / $849.82 |
|
Choices budget |
$1163.09 / $1263.35 | $1665.85 / $1330.30 |
NOTE: This graph is based on figures from 2023 from the Massey University NZ retirement expenditure guidelines. According to the same report most Kiwi’s aspire to a better standard of living in retirement than can be supported by NZ Superannuation alone and most households where NZ Superannuation is currently a source of income have achieved this.
---
It’s also worth thinking about how best to use your KiwiSaver during retirement. You may need it to pay down debt and you may be able to create an income stream from it by investing it. Everyone’s situation is different so we recommend seeking advice from a Financial Adviser who could tailor a solution that is unique to your requirements.
There are numerous independent Financial Advisers around the country who understand ethical investing. Moneyworks won Best Ethical Financial Adviser at the Mindful Money Awards. Ethical Investing NZ was runner up and Evergreen was also nominated. Get in touch if you would like us to recommend an adviser that may suit you.
5. What can you do if your projected retirement income is not quite as healthy as you thought?
Your retirement income may not look as healthy as your wage income now. There are some things you can do, that may help your situation including:
Part time employment – this can be a great way to ease into retirement and give you the chance to adjust to a new routine. You will start to receive your NZ Superannuation at age 65 regardless, so part-time employment might be a way to supplement this income. Please note that it’s up to your employer whether they will continue paying a KiwiSaver contribution after age 65 – it may pay to negotiate this in advance.
The family home is often people’s biggest asset. You could use your home to generate income by renting a room, converting it to a dual income property or downsizing.
You can use your KiwiSaver investment and its interest in lots of different ways.
Other income, like investments or a business side hustle can provide additional income in retirement. Just note, that you’ll still need to pay tax on any additional income.
Remember, the aim is to access enough income to meet your retirement needs so it may be worth talking to a Financial Adviser.
Podcasts to get you excited about your future.
Here are a couple of great podcasts on retirement brought to you by The Curve – where hosts Vic and Sophie have intimate conversations about investing and money.
The $100,000 reason you need to sort your retirement fund today
Margaritas on the beach in Mexico? Spending time with your Grandchildren? No matter how you picture your ideal retirement, your KiwiSaver is going to help you get there. In this episode Sophie finally gets her head out of the sand and learns the tangible, financial benefits of getting her KiwiSaver sorted so that her future self will thank her (and be able to afford the Margaritas). We can’t stress enough how vital this conversation is, so get ready to take some action after listening to this chat!
Listen here
---
The joys of an adult star chart
If you’re anything like us, when you hear the word ‘retirement’, your mind goes straight to the rest home: long lonely days, wiry greys, and endless games of bingo.
But the reality is, retirement can actually be a massively exciting time (if you’re prepped and ready for it, which you will be after this episode). Alongside giving retirement the hot new look it deserves, we discuss how much you may need (and how to get there), balancing experiencing today with saving for tomorrow, the mind-blowing beauty of compound interest, and the joys of an adult star-chart.
Listen here
---
And remember, Pathfinder are here to help you reach your retirement goals. Please get in touch with us if you have any questions.
Disclaimer: This article is intended to provide you with general information only. It does not take into account your objectives, financial situation or needs. Pathfinder Asset Management is the provider of the Pathfinder KiwiSaver Plan. Please read the Pathfinder KiwiSaver Plan Product Disclosure Statement. Before investing you may wish to seek financial advice and please remember that past performance is not a reliable indicator of future performance.
