Marlborough Express - Weekend Express
Super-sized savings fear
ROB STOCK
MONEY MATTERS
rob.stock@fairfaxmedia.co.nz
Telling people they need a sevenfigure retirement fund by age 65 to have a comfortable retirement is so desperately, depressingly unhelpful.
As Joe Bishop from the Kiwi Wealth KiwiSaver scheme put it the other day: ‘‘Some of the amounts we’re being told we need to have saved for retirement are, for most of us, unreachably big, so big that a lot of people actually give up even trying.
‘‘It’s possible these target figures are hindering, rather than helping, more Kiwis saving for retirement.’’
He called out a New Zealand financial adviser who said $2m in savings was required for a ‘‘comfortable’’ retirement, and Massey University’s claim that $400,000 is the target for people seeking a comfortable retirement at age 65, meaning a 30-year-old would need just over $100,000 tucked away at age 30.
‘‘These are enormous sums that people might consider to be frightening and unattainable,’’ Bishop said.
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‘‘If people think they’ve got no chance of reaching a goal, they won’t try. While it’s good to be straight-up and forthright, it’s important to be constructive, too.’’
$1m, $2m, $400,000. Those are other people’s numbers.
Your number may turn out to be $400,000, or $1m, but it may also be $250,000.
Each of us has to work out what we think we need.
There are tools like Kiwi Wealth’s Future You, and ANZ’s retirement savings calculator that make it easier to do.
ANZ said the average KiwiSaver at age 30 was on track to get to $160,000 in their accounts by age 65.
That will, the bank estimates, let them sustainably supplement NZ Super by about $155 a week during retirement.
Not enough for you? Better start working on your plan.
Kiwi Wealth estimates that $260,000 will get an income in retirement of $11,000 to $15,000, with a middle-of-the-range estimate of $13,000. That’s $20,000 saved for each $1000 of annual income you want to sustainably generate after age 65.
There are, of course, more ways to build wealth than KiwiSaver.
All being well, those 30-yearolds ANZ speaks of are hopefully paying off mortgages, and may even be property investors.
Once they have debt-free homes, they can up their savings rate. Many plan to downsize their home when they stop work to boost their KiwiSaver pot of gold.
Or they may, at age 40, launch into business, and end up a good deal wealthier when they sell their business at age 60.
The big sums you hear bandied about are also based on some big assumptions, such as stopping work at 65, which many people don’t, and take no account of alternative living arrangements, such as multiple generations living together.
The bitter irony about the big numbers is they’d be easier for young people to hit, if homes didn’t cost so much.
I can’t tell you your number, but I can tell you three things: NZ Super isn’t enough for most; a debt-free home is the foundation of a decent retirement; and only you can take responsibility for generating retirement wealth.