As New Zealanders approach retirement, they face several key financial and lifestyle concerns.
Milestone’s financial advisers remain available to discuss retirement plans and finances for both existing or new clients. We love helping our clients to make the most out of their retirement years with well-considered financial plans. Below we highlight some key findings from Massey University’s 2024 New Zealand Retirement Expenditure Guidelines annual publication.
Financial Preparedness and Income Gaps
Many retirees find that New Zealand Superannuation (NZ Super) alone is insufficient to maintain their desired standard of living.
Retirees often rely on additional income sources, such as savings, investments, or part-time work, to supplement NZ Super.
The report categorises two spending levels: “No Frills” (basic living) and “Choices” (comfortable lifestyle), with most retirees exceeding what NZ Super provides.
The estimated lump sum savings required at retirement varies widely, from $48,000 to $1.14 million, depending on lifestyle and location.
Impact of Inflation and Cost of Living
Inflation remains a significant concern, with rising costs in housing, transport, and insurance affecting retirees the most.
Retired households experienced inflation rates between 1.8% and 3.46% over the past year, with some groups facing cost increases above the national average.
Many retirees adjust their spending habits to cope with price increases, often at the expense of discretionary expenses like travel and entertainment.
Longevity Risk and the Fear of Running Out of Money (FORO)
A major concern is outliving retirement savings, leading some retirees to underspend, sacrificing quality of life.
Life expectancy continues to rise, making retirement planning more complex.
Strategies to manage longevity risk include:
Diversifying investments to balance income generation and capital growth.
Adjusting withdrawal rates to ensure sustainable income.
Considering annuities or other guaranteed income sources.
Retirement Income Sources and Dependence on NZ Super
Most retirees supplement NZ Super with wages, self-employment, investments, or private pensions.
The “Choices” households rely less on NZ Super (33-58% of their income), while “No Frills” households depend on it for 77-97% of their total income.
Couples often have an advantage as one partner may continue working to provide extra income.
Planning for Future Healthcare and Lifestyle Changes
Health-related expenses tend to increase with age, making medical costs a key concern.
Many retirees need to plan for downsizing, moving into retirement villages, or covering aged care costs.
Lifestyle adjustments, such as reducing travel and giving up homeownership, may become necessary in later years.
Retirement planning in New Zealand requires careful consideration of income sources, cost of living, and longevity risks. While NZ Super provides a foundation, most retirees must supplement this with savings or other income to maintain their desired lifestyle.
Proper financial planning, early savings, and flexible spending strategies are essential for a secure and comfortable retirement.
If you know of someone who could benefit from a no-cost initial talk to a Milestone financial adviser, we welcome your referral.
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