How to retire comfortably


Generate Contributor


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While retirement may seem a while off for many of us, putting money aside now will have your future self thanking you.

“The earlier a person starts saving for their retirement the better, but it is never too late to start unless you’ve already retired!” says Generate KiwiSaver adviser, Stephanie Whittaker.

It doesn’t take much to start saving for your retirement, with KiwiSaver contributions starting from just 3 percent of your annual income.

But if you’ve opted out of KiwiSaver, or taken an extended contribution holiday, a warning that relying on the Government Superannuation Fund, which may or may not be there by the time you reach retirement, may not be enough to cover your expenses.

“It’s generally recommended that you’ll need at least 70 percent of your pre-tax income after you retire to live, assuming you own a home and are mortgage free, so relying on NZ Super payment is potentially not going to be enough,” says Whittaker.

Current NZ Super payments are $356 each per week if you’re a couple, and $463 per week for those living alone - well short of what’s consistently shown as needed to pay for a basic, no-frills lifestyle.

A 2019 study by Massey University found that a single person in Auckland, Wellington or Christchurch would need $602 a week, or $574 if they lived in the provinces. A more comfortable lifestyle, with some luxuries and treats, cost $1,190 in a main centre or $831 in the provinces.

Thinking about the type of retirement you want, may be a key incentive to start saving for retirement today.

“At 65, life is not over! You can be fit, healthy and wanting to travel; visit relatives, go out for dinner, even a daily flat white - but that could become out of reach if you don’t plan now. None of that will happen without giving it some thought today, no matter what age you are,” says Whittaker.

To figure out how much money you’ll need for a comfortable lifestyle in retirement, Generate recommends using an online calculator or talking to one of their nationwide experts.

“The key with KiwiSaver is contributing as much as you can afford to, your contributions then benefit from ‘time in market’ and have the opportunity to earn compounding returns over time,” says Whittaker.

In Australia, the compulsory retirement contribution rate is 10 percent and it’s soon moving to 12 percent - in the UK it’s also 10.5 percent.

“For those who can afford it – a higher contribution rate of 8 or 10 percent will more likely help them save enough for a comfortable retirement, and remember, it always pays to check what type of fund you’re in for different stages of life, to make sure it’s working best for you,” says Whittaker.

To talk with a Generate adviser about your KiwiSaver account, contact us on 0800 855 322, or send us an email.