Are you prepared for retirement?

How financially secure do you feel right now? If the answer is ‘not very’, it could be a good time to start sharpening your retirement planning skills.

After all, we all want to retire knowing there’s enough in the cookie jar to cover the day to day expenses plus any unexpected costs – such as a large medical bill or a new fridge!

How to start planning ahead

Look at the big picture first: what kind of retirement would you like to have? To start figuring this out, you could ask yourself the following questions:

• At what age would I like to retire?
• What do I want to do in retirement?
• What kind of retirement lifestyle do I want?
• How much money will I need to live on each year?

Your answers will go at least some way towards helping you start planning, and using a retirement planner calculator can also help you come up with a goal to work towards.

And it’s never too early to start – even though it may be tempting to leave big financial decisions in the 'too-hard' basket while you're young. Studies show that we tend to spend more money in retirement than expected, so it pays to plan ahead.

How much do you need to retire on?

Research indicates that a couple living a no-frills retirement lifestyle needs $899 per week if living in a city centre or $640 in the suburbs. That figure grows to $1436 per week in a city centre or $1136 in the suburbs for a more comfortable retirement lifestyle.

You may already have been putting some spare change aside in your KiwiSaver account (the government’s voluntary saving scheme). If not, it could be worth considering one. You can contribute a certain percentage of your salary (3%, 4%, 6%, 8% or 10%) and your employer must match it with a contribution of at least 3 percent of your gross salary. The government also makes an annual contribution.

Budgeting for the future

Planning for retirement can start at any life stage, whether you're welcoming your first child or your first grey hair! That being said, your strategy will likely look a lot different depending on where you're at.

• Having a baby If there’s one life change that’ll put pressure on your budget it’s starting a family. Now’s the perfect time to curb those nasty spending habits and maybe even start considering life insurance for your family in case something happened to you.
• Buying your first home A mortgage will take a chunk out of your income every month so factor this into your budget. A common goal for many people is to try to be mortgage-free by the age of 65, by paying down your home loan with a smart strategy. That being said, everyone's realistic goals will be different.
• Staying on top of other debts Paying off the mortgage is usually priority for most of us, but it's also worth looking at any other lingering debts which could follow you into retirement. Enjoying your well-earned time off is a lot easier when you don't need to worry about the car repayments or any other loans you've taken out over the years. 

Government entitlements

It can be overwhelming to think you have to save hundreds of thousands of dollars in order to retire – but don’t stress, the NZ government does help you out.

If you’re a Kiwi resident over the age of 65, you’ll automatically get the government pension (NZ Super), regardless of how much you’ve earned through paid work, savings and investments. 

Can you live on NZ Super alone? Many say yes – but if you want a really comfy retirement where you can eat out, take regular holidays and go on the occasional online shopping spree you may need to pad it out with your own savings, too.

It’s also worth remembering that when you reach retirement age, you’ll be given the Super Gold Card which gives you access to thousands of discounts and special offers.

Estate planning

As part of your retirement planning, it’s a good idea to seek legal advice and get a will (or ensure your existing will is up to date with the correct beneficiaries). Make sure you nominate beneficiaries for your super and pension accounts while you’re at it!

Appointing a power of attorney is also key – and this could be your spouse or a trusted friend or relative who could step into your shoes and handle things if you became ill or incapacitated.

Start with the small things

Planning ahead for a comfortable retirement isn’t hard to do, but it does take some discipline – and the earlier you start, the better. Here’s hoping the ideas above will inspire you to get cracking, and start carving out a solid lifestyle for yourself in your later years.

24 Feb 2021