The harsh reality of being retired in NZ
Retirement is meant to be our golden age. The time we can relax a little, enjoy the benefits of a lifetime of working and saving, and not spend our final few decades worrying about how to make ends meet or where the next dollar will come from.
Research released this month by the Financial Services Council provides a wake-up call on that rose-tinted vision.
Rather than enjoying a comfortable retirement the majority of retirees are reduced to living off NZ Super alone after just 10 years of retirement, with a significant weekly income shortfall.
Put another way this means that many of us use all our savings and other assets within 10 years of retiring. With the average person now expecting to be retired for 20 plus years, most retirees expect to live the last 10 or more years of their lives on the government pension only.
At current rates that works out at around $400 in the hand per week for a single person or about $600 for a couple. Not much is it?
We also used the research to dig into the total wealth New Zealanders take into retirement and whether retirees will be over or under in regards to their ability to live comfortably once they stop paid work. Again, the findings show a sobering reality.
Those over 65 and retired think they need $655 per week to live comfortably.
Our research shows that, in reality they have, on average, $437 per week, equating to a shortfall of over $200 per week. This is a considerable gap and even bigger for those who don’t own their own home.
This gap between expectation and reality sends a clear message to those of us still working to make the most of opportunities to grow our retirement nest egg and do everything we can to increase our sources of income in retirement.
Being confronted by a swathe of findings about the reality of current retirement in New Zealand can make for grim reading, but what can we do about it?
Firstly, it’s important to be clear that retirees generally are not in this position because of excessive spending. Cutting spending or urging further restraint is not a sustainable solution.
Rather, the strong message from this work is the need for greater education and advice prior to retirement, so that people don’t find themselves in a precarious position and reliant on narrow mix of assets to draw on once regular income stops.
We know from our research that almost half of all elderly New Zealanders regret not having more financial advice.
It’s also clear that many want support with embracing new technology to further help them get the most out of their assets and investments.
Equally, as the number of over 65s in KiwiSaver grows, many of them will expect their providers to step up with more advice on how to reinvest savings and funds raised from the selling of major assets like the family home. This research is a wake-up call.
It’s a wake-up call for the financial services industry that we need to do more and step-up our education, advice, and offerings for the public so that they can make the informed decisions necessary to have a comfortable retirement.
It’s a wake-up call for our political leaders. KiwiSaver has been a great start but a decade on more leadership is needed to ensure that New Zealanders are ready for retirement. There is overwhelming public support for further beefing up of KiwiSaver and the Government should act.
And finally, it’s a wake-up call for the public. This research shows that without proper planning many of us will face a tough and uncomfortable retirement. No matter what your age you need to take responsibility and start planning for your retirement today – not tomorrow, not next week, not next year.
There are no easy answers or simple solutions to ensuring a comfortable retirement, but, this research gives a clear message that if we don’t collectively step up our efforts then a stark reality awaits many of us in retirement.
So, this holiday season as we all take the opportunity to celebrate the past year and start planning for the year ahead, why don’t you put retirement planning in your Christmas stocking?
This research shows that without proper planning many of us will face a tough and uncomfortable retirement. No matter what your age you need to take responsibility and start planning for your retirement today.