$101K in savings needed to retire
People need more than $100,000 in savings at age 65 in order to be able to afford the most basic of lifestyles in either Auckland, Wellington, or Christchurch, research from Massey University has found.
‘‘We estimate a single person living in Auckland, Wellington or Christchurch would need savings of at least $101,774 to make up the gap between superannuation payments and a basic level of household expenditure,’’ Dr Claire Matthews from the Westpac Massey Fin-ed Centre said.
NZ Super, the country’s universal state pension, is too little to live on on its own for many retirees, especially those who don’t own their own homes.
Matthews said the gap between income and expenditure for New Zealand retirees continued to shrink, but rising housing and household utility bills meant NZ Super payments still didn’t cover the costs of living for many retirees, she said.
Every year Massey academics update their figures on how much it costs to live ‘‘no frills’’ and ‘‘choices’’ lifestyles in retirement.
No frills is just getting by on a limited diet, with no holidays, while choices includes better food, and holidays.
Matthews said housing and household utility bills were the most significant cost for retirees.
Thanks to the rising rental costs created by a shortage of homes in our big cities and councils hiking their rates, housing and household utility bills have increased far faster than the consumer price index (CPI), putting pressure on retirees.
Matthews said costs like rates and power bills were unlikely to decrease any time soon.
In addition, the growing number of retirees renting rather than owning their own homes was also likely to ensure a continuing difference between the level of superannuation and most retirees’ actual expenditure, she said.
Some of the gap is made up for retirees with an accommodation supplement, and other government allowances, which may not be available if people amass savings in Kiwisaver.
The current cash asset test is just $8100 for a single person for an accommodation supplement.
The estimated Kiwisaver nest eggs needed to add to NZ Super to achieve the ‘‘no frills’’ retirement for a one-person household is $101,774 for people retiring in a city, and $30,199 for people retiring in a small country town.
The amount needed for a ‘‘choices’’ lifestyle in a city would be $360,620.
For a two-person household, it’s easier going. A ‘‘choices’’ city lifestyle would need a combined nest egg of $486,023, or $243,011 each.
All these sums were calculated assuming the individual, or couple, would live until the age of 90, Matthews said.
She said that while it’s never too late to start preparing for retirement, getting a head start on saving can really pay off.