A retiring couple relying only on New Zealand Superannuation need to have saved $809,000 to fund a “choices” lifestyle in a city, the latest Massey University Fin-Ed Centre annual Retirement Expenditure Guidelines shows.
But if those retiring in the provinces need only $511,000.
Single people wanting to live a “choices” lifestyle need $600,000 for retirement in provincial towns, and $688,000 for a city retirement.
The yearly guidelines are designed to show the estimated nest eggs retirees need to fund the gap between NZ Super, and the cost of either a pleasant “choices” lifestyle, or a bare bones “no frills” existence.
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But while the sums are large people able to work past the age of 65 can get away with saving less, authors Pushpa Wood and Claire Matthews say.
The nest eggs are calculated using real-world spending data of over 65s taken from the Household Economic Survey and adjusted for inflation.
However, the spending data includes people who are still working after the age of 65.
While people need substantial savings to supplement NZ Super to pay for a choices retirement, which includes more luxuries like spending on eating out and clothing, they still need savings to even achieve a no-frills retirement, Wood and Matthews found.
FINANCIAL SERVICES COUNCIL
Social justice and retirement policy campaigned Susan St John speaking at the Financial Services Council conference this week on why KiwiSaver is not fair to women. First published in 2020.
Even couples living a “no frills” lifestyle needed $75,000 saved for a no-frills rural lifestyle, and $195,000 for a city no-frills existence.
The single, living alone rate for NZ Super is $436.94 a week after tax, and for couples that both qualified $672.22, the report says.
But Wood urged people not to be frightened by the figures, and to do all they could not to “sleepwalk” into retirement.
“Retirement is only scary, if you go into it in an unplanned, unprepared way. Then it comes as a shock to your system. That’s the key message,” Wood says.
Tools like KiwiSaver could be used to amass retirement savings, but people could also close the gap by working past the age of 65, which many older people already do, Wood says.
“If you add three more years full time, and you might add three more years part-time, you are constantly saving while you are supplementing your super,” Wood says.
Matthews says baby boomers need to show urgency in their preparation as at most they now have eight years before reaching the age of 65.
“While the millennials have at least 25 years before reaching age 65, it is not too soon for them to start thinking about their retirement,” she says.
To avoid sleepwalking into retirement, people need to consider factors like budgeting, life insurance, health needs, living arrangements, wills, enduring powers of attorney, and family trusts, Matthews and Wood say.
Many younger people doubt their ability to save meaningful sums to ensure they have decent retirements, but over 65s have strategies to cope financially that are revealed by official data from other sources, the Bank of New Zealand Wellbeing Report found last year.
Many people continue working past the age of 65, enabling them to draw NZ Super, and build up their savings.
The average effective age of retirement in New Zealand is 69.8 years for men, and 66.4 years for women, according to the OECD.
Some over 65s also live with younger family members to share the financial load.
While about 80 per cent of over 65s live alone, or with one other person, there were just over 64,800 households with three or more generations co-habiting, according to 2018 census data.
Statistics NZ figures show between 4700 and 8900 households with multi-generation households with at least one over 65 in them.
Some over 65s also get extra benefits. Since 2018, people getting NZ Super also get winter energy payments, and in March 47,415 people getting NZ Super or Veterans’ pensions were also getting accommodation supplement, the Ministry of Social Development said.
Just over 9500 of them were getting additional emergency support, and just under 132,000 were getting disability allowance.
About 18,000 people living in Kāinga Ora homes are aged of 65 and over.