Can we retire with $500k in kitty?
Couple keen to quit work at 65 ask Shelley Hanna if their nestegg is sufficient
You should assume that you will spend a similar amount when you retire, although it is possible to cut back in some areas.
QMy wife and I will both be turning 65 this year. We have worked hard and have saved over $500k in bank deposits and KiwiSaver, plus our home is freehold. Can we afford to stop working at 65? I have read that you need a lot more to retire comfortably. Our health is okay but the thought of working past 65 doesn’t appeal. How much will we need, and should we top up our NZ Super from our bank deposits or KiwiSaver?
There are many people who would love to be in your shoes — heading into retirement with half a million saved — plus a freehold home. Will it be enough for you? That depends on your budget and the type of retirement lifestyle you want.
Start prioritising your health as well — ironically working too hard to save for a comfortable retirement can impact on a person’s wellbeing and longevity. Set goals for 2021 in respect of your health and fitness and develop some healthy exercise habits now.
It may be helpful to consult an authorised financial adviser, to talk through your retirement plans and ensure your investments are well placed to deliver the best outcome for you. If you prefer the DIY approach, there are plenty of online tools to help you.
You need to calculate your desired income in retirement. The current rate of NZ Super for a married couple who both qualify is $652 per week. Can you and your wife live on $652 per week? For some retired folk who own their own homes, that is more than enough. I often get told “We are saving money on the Super!”
Equally, there are many who use their savings to top up their Super — often to pay for items such as holidays, home maintenance, car repairs or medical expenses.
Your best strategy is to analyse your spending over the last 12 months. Print off your credit card and bank statements and go through them line by line. Categorise them under headings such as Groceries, Vehicle, Insurance, Rates, Travel and so on. To help you nail down all your outgoings, download a budget spreadsheet — try the one on the FinCap website.
You should assume that you will spend a similar amount when you retire, although it is possible to cut back in some areas. Divide by 52 and you will see how far your NZ Super will go.
Retain some diversification with your investments as you head into retirement. Over the longer term your KiwiSaver (or other managed funds) should generate higher returns than bank term deposits, particularly if you are in a balanced or growth investment. The Sorted KiwiSaver FundFinder tool can help you identify your risk profile and look at suitable schemes.
If you treat your bank deposits as your low risk, shorter-term investments then you can push out your timeframe for your KiwiSaver accounts and take on more risk. Remember, KiwiSaver is well regulated by the Government so when we talk about risk we are chiefly talking about the proportion of shares in the fund, rather than unconventional or dubious investments.
Use the Retirement Planner tool on the Sorted website to see how much you can spend a week once you stop working. You can input your age, type of savings, required retirement income and life expectancy.
This is 94 for women and 91 for men. If you decide you need $1000 a week (including NZ Super) you can set up withdrawals of $348 a week from your bank savings, which with NZ Super will give you $1000 a week. According to the Sorted Retirement Planner, this is quite achievable with your current savings.
is an authorised financial adviser FSP12241. Her disclosure statement is available on request, free, by calling 06 870 3838 or at peak.net.nz. The information
here is of a general nature, not personalised. KiwiSaver questions to
shelley.hanna@peak.net.nz