Financial Planning for Your Retirement
Planning for retirement is a crucial step toward ensuring financial security in your later years. A key part of this process is determining your "retirement number"—the amount of savings required to maintain your desired lifestyle.
Understanding this number helps shape your savings strategy and investment decisions, guiding you toward a comfortable and secure retirement.
Estimating your retirement expenses
Start by assessing your expected expenses in retirement. Consider costs such as housing, healthcare, daily living, travel, and leisure activities. According to the New Zealand Retirement Expenditure Guidelines 2023, published by Massey University, a single retiree living in a metropolitan area with a "No Frills" lifestyle requires approximately $826 per week, while a "Choices" lifestyle necessitates about $1,163 per week (Massey University, 2023).
Once you estimate your annual retirement expenses, calculate the total amount needed to sustain yourself over time. For example, if you require $60,000 per year and expect to be retired for 25 years, you’ll need approximately $1.5 million. However, this figure does not account for inflation or investment returns, which can significantly impact your actual needs.
Assessing your current assets
Evaluate your existing assets, including:
Savings and investments (KiwiSaver, shares, bonds, term deposits)
Property (your home, rental properties, or other real estate)
Income sources such as NZ Superannuation (NZ Super)
While NZ Super provides a foundation, it may not be enough to maintain your desired lifestyle on its own. That’s why many retirees supplement it with income from investments, property, or part-time work.
A key advantage of NZ Super is that you can still receive it while working. This means you may reach your retirement number yet choose to stay in the workforce—either to supplement your income, stay engaged, or extend the life of your savings. Unlike means-tested pensions in some countries, NZ Super is available to all eligible New Zealanders aged 65 and over, regardless of employment status. However, your earnings from work are still subject to tax, so it’s important to consider how this affects your financial plan.
The role of KiwiSaver in retirement
KiwiSaver is a valuable tool for retirement savings in New Zealand. At age 65, you can withdraw your KiwiSaver funds, though deciding whether to take a lump sum or keep it invested depends on your retirement goals. Unlike some overseas pension schemes, KiwiSaver does not automatically provide a regular income stream, so careful planning is required to ensure your funds last.
Determining when you have enough to retire
Reaching your retirement number means you have the financial option to retire, but that doesn’t mean you have to. Retirement is about more than just money—personal fulfilment, health, and lifestyle goals all play a role. Some people continue working for engagement and purpose, while others prioritise leisure and travel. The right choice depends on what makes you happiest.
To help refine your retirement plan, use online retirement calculators and planning guides or work with a financial advisor to gauge whether you're on track. Regularly reviewing and adjusting your strategy ensures your financial security and peace of mind.
Determining your retirement number is a personal process that requires careful planning and a clear understanding of your financial situation. While reaching this number gives you the option to retire, the decision should also consider your personal satisfaction and long-term well-being. By staying informed and regularly reviewing your retirement plan, you can enjoy a fulfilling and financially secure retirement.