Right recipe for retirement

Effort, time, advice, and going for growth are the four key ingredients in the recipe for a prosperous retirement, a survey of older New Zealanders has revealed.

The Financial Markets Authority, which regulates financial advisers, paid Colmar Brunton to survey just over 500 people aged between 60 and 74 years to find out how well they had prepared for retirement.

It found just a third of people were ‘‘extremely’’ or ‘‘very’’ confident they would be financially ready when it was time to stop work.

‘‘The real difference comes from starting early,’’ said the FMA’S Paul Gregory.

‘‘The investors feeling most confident are more likely to have looked for information or advice more than 10 years out from retirement. They are also more likely to have a healthy retirement savings balance,’’ Gregory said.

Some do a shorter retirement saving sprint, Colmar Brunton found, many with some success.

‘‘There is still a lot of confidence, and significant final retirement balances, among investors who started between six and 10 years out from retirement,’’ Gregory said.

Older New Zealanders reporting strong confidence about their retirement had some key things in common, Colmar Brunton found.

First, they had retirement savings of $450,000 or more, a sum that represented the financial wealth of them and their partner, excluding equity in their home.

Second, they put in the effort, and started retirement planning early.

‘‘Ten years or more before retirement is best, but confidence begins to sharply increase even six years out,’’ Gregory said.

Third, they got ‘‘help’’ from an adviser, family member, or financial provider, or helped themselves through their own research.

And finally, they invested with the emphasis on growth investments like shares, and funds with high allocations to shares.

Gregory said people who worked closely with a financial adviser were happier choosing a broader range of investments, taking more risk, and worrying less about ups and downs in their investments.

‘‘A lot of existing research, including our own, has shown how poorly prepared the majority of older New Zealanders feel about their retirement,’’ he said.

‘‘With this work we wanted to engage with people about the factors that would make them feel confident, and ask them why.

‘‘We hope the insights these people provided will prompt New Zealanders to take some action.’’

But while advice had helped in many cases, there were plenty of people who had achieved their goals without it.

‘‘One of the most important things we found was that while getting advice from a professional, regulated financial adviser works, it’s not the only route to confidence,’’ Gregory said.

‘‘Talking to family and friends, opening some books or using the internet, or resources from a financial provider, were just as good.’’

Advice was changing, Gregory said. Traditionally, it was given only by financial advisers, but in the future ‘‘roboadvice’’, which was delivered online by artificial intelligence, and ‘‘class’’ advice delivered by the likes of Kiwisaver providers were likely to play a bigger part in retirement planning.