Your Retirement

Providing for retirement is an important part of any financial plan, and it is important to start thinking about it as early in life as you can. The closer you get to retirement age, the more important retirement planning becomes for most people.

In retirement planning you will look at building up sufficient retirement capital to provide you with an income stream for your retirement needs. This part of your plan should also look at any government income support, such as Superannuation, for which you may be eligible (refer below).

Click here for details on Superannuation entitlements.

Your desired pre-retirement and retirement lifestyles also need to be identified as does the potential for high inflation or a recession, two factors which can reduce the spending power of your retirement planning.

New Zealand Superannuation

This is a tax-funded pension available to all New Zealanders in New Zealand who have reached the age of entitlement and meet all residency requirements. The current entitlement age is 65 years.

Some uncertainty surrounds the future of New Zealand Superannuation, as successive governments wrestle with the fact that the proportion of New Zealanders in retirement is steadily rising, while the proportion of people of working age is falling – with obvious implications for a tax-funded superannuation scheme.

Click here for details on Superannuation entitlements.

When should you start saving for Retirement?

This one’s easy. You should be thinking about funding life after your career as soon as possible after you start working. Now, in other words!

Lack of time is the biggest problem faced by people saving for their retirement. The longer you delay the narrower your options and the tougher it’s going to be to achieve your savings goal.

Reasons to Save

Because you don’t want to work forever,and you will ultimately be responsible for paying for your retirement: If you want to stop working one day, you are going to have to think about how much income you will need to live. Social Security provides a basic “floor” of income that you will have to build on for a comfortable retirement. Pensions have provided about 1/3 of retirees with some added income each month. Look for a job that comes with a retirement plan. Others have a savings plan at work. Use it.

Because you want to have enough money saved for a comfortable retirement: Many people assume that expenses will go down in retirement, but frequently that is not the case. Inflation means you will need more, not less. Higher property taxes could cause your housing costs to be more. You might spend less on clothing, except you’ll have more time to do it! Many other expenses may arise: increased medical costs and health insurance premium costs; financial help for children/grandchildren, or even elderly parents; more free time that could result in more money being spent on traveling and entertainment.

Because you don’t know how long you will be able to work: The Retirement Confidence Survey found that 39 percent of current retirees retired earlier than planned due to an unexpected event such as health problems or changes in their company such as downsizing. The earlier you start preparing for unexpected events, the better.

Because you don’t know how long you will live: People today are living longer. Retiring at age 65 today? A man would have a 50% chance of still being alive at 81, a woman 85. A 25% chance of living to nearly 90. A 10% chance of getting close to 100. How big a chance do you want to take of living longer than you savings lasts?

What is KiwiSaver all about

KiwiSaver is a government-sponsored framework for work-based retirement savings. The government doesn’t manage savings under KiwiSaver – rather, savings are managed by private sector scheme providers. KiwiSaver is voluntary to join, but compulsory for employers to facilitate. To encourage membership the Government has offered significant incentives for KiwiSaver members.

For more details, click here.

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