Planning for Retirement in New Zealand: Everything You Need to Know

When you think about retirement, it can seem like something you don’t need to worry about right now. But for a lot of Kiwis, the dream of a comfortable retirement full of travel, hobbies, and time with family and friends is not enough to just wish for it. You need a plan. With the economy changing and superannuation rules changing, it’s more important than ever to know how to protect your financial future.

No matter how old you are, thinking about your life after work now is one of the best financial decisions you can make. It’s not enough to just save money and hope for the best; you need to make smart choices that fit with the life you want to live. This guide will help you plan your retirement in New Zealand by showing you how to figure out when to start, how much money you’ll need, and how to make the most of Kiwi Saver and other investment options.

When to Start Making Plans for Retirement

The best answer to “When should I start?” is right away. The sooner you start, the more you can take advantage of the power of compounding interest. When you compound your money, it can make more money on its own, which can add up over time and make your nest egg much bigger.

• Your best asset in your 20s and 30s is time. Over the course of many years, even small, regular donations can add up to a large amount. Starting early gives you a strong financial base and makes saving feel less like a chore later on.
• If you haven’t started yet, don’t worry. It’s time to get serious now. You might have to give more of your money, but you still have a good 20 to 25 years for your investments to grow.
• In your 50s and beyond, you will probably stop trying to get rich and start trying to keep what you have. At this point, it’s very important to make the most of your contributions and make your investment strategy more conservative as you get closer to retirement.

No matter how old you are, today is the best day to start. The most important thing is to have a clear plan.

How to Figure Out What You Need for Retirement

People often ask, “How much money do I need to retire comfortably in New Zealand?” The answer is very personal and depends on how you want to live.

The 80% rule is a good rule of thumb. It says that you’ll need about 80% of your income before retirement to live the same way. But your costs could go up. You might not have to pay off your mortgage, but you might spend more on travel, health care, or hobbies.

• The New Zealand Retirement Expenditure Guidelines from Massey University are a good place to start. They say that as of 2023, a single person living in a big city with “no frills” needs about $897 a week.
• A single person living in a big city with a “choices” lifestyle (which includes more discretionary spending) needs about $1,368 a week.
• In a city, a no-frills lifestyle for two people costs about $1,051 a week, while a choices lifestyle costs about $2,003 a week.

You can use these numbers to set a goal. Think about the kind of life you want to live: Are you going to travel abroad? Do you eat out a lot? Do you have expensive hobbies? Answering these questions will help you figure out a more realistic savings goal.

KiwiSaver: Getting the Most Out of Your Contributions

For most New Zealanders, KiwiSaver is the most important way to save for retirement. It’s a savings plan that you can choose to join at work. It’s meant to be a simple way to save money.

Here are some tips for making the most of it:

• Give enough to get the government to give: The government will match your contributions with 50 cents for every dollar you give, up to a maximum of $521.43 per year. You need to give at least $1,042.86 a year (about $20 a week) to get the full amount. This is basically a sure way to make 50% on your money.
• Pick the right type of fund: KiwiSaver providers offer a range of funds, from conservative (lower risk, lower potential returns) to growth (higher risk, higher potential returns). Your age and how much risk you can handle should guide your choice. Younger investors can often afford to be in funds that grow faster, while those who are close to retirement might want to be more cautious or balanced.
• Review your provider: Don’t just set it and forget it. Different providers have different fees, performance standards, and ethical standards. Check your KiwiSaver account from time to time to make sure it still meets your needs.

Looking into other ways to invest for retirement

KiwiSaver is a great place to start, but it might not be enough to pay for all of your retirement. You can build wealth and manage risk better by spreading out your investments.

Other popular options in New Zealand include:

• Managed Funds: Managed funds let you invest in a wide range of assets that are managed by professionals. They are like KiwiSaver funds, but you can take money out of them whenever you want.
• Investments in Direct Shares: Buying shares in individual companies can be very profitable, but it also comes with a lot of risk. This needs more research and a good understanding of the market.
• Properties for Investment: Property is a common and real investment for many Kiwis. Rental income and capital gains can be a big part of a retirement plan, but they need a lot of money and work to manage.
• Term Deposits: Term deposits are a low-risk option that banks offer. They give you a fixed interest rate for a set amount of time. They are safe, but they usually don’t make as much money as other types of investments.

A balanced portfolio that includes different types of assets is often the best way to go.

Help and benefits from the government

When planning your retirement, it’s also important to think about government help.

• NZ Superannuation (NZ Super): This is a pension that the government pays to eligible New Zealanders starting at age 65. How much you get depends on your living situation, like whether you’re single or have a partner. NZ Super is a safety net, but it is only meant to cover basic living costs.
• Age of Retirement: Right now, you can get NZ Super when you turn 65. But people are still talking about raising it to 67. It’s important to stay up to date on possible changes so you can plan for the long term correctly.

If you only rely on NZ Super, you probably won’t be able to live a “choices” lifestyle in retirement. You shouldn’t rely on it as your only source of retirement income; it should be seen as a supplement to your own savings.

Your Way to a Safe Retirement

Taking charge of your retirement future gives you power. It starts with knowing what you want to achieve, making a budget that makes sense, and regularly adding to a well-diversified investment portfolio. The journey may seem long, but every step you take today gets you closer to the retirement you deserve, where you can relax and enjoy life.

If you’re feeling overwhelmed or don’t know where to start, getting help from a professional can make a big difference. Business Kiwi’ experts are here to help you figure out how to plan for retirement. We can help you make a plan that works with your specific financial situation and lifestyle goals. Set up a meeting with us today to start planning for your future.