Gap between pension and spending doubles
Even retirees with the sparsest lifestyles are now typically spending more than they get from the government pension.
The Westpac Massey Fin-Ed Centre at Massey University has updated its retirement expenditure guidelines, which are produced each year to show what people are spending in retirement. The data is based on Statistics New Zealand’s household economic survey.
People are divided into those with a lean ‘‘no frills’’ lifestyle and those with a ‘‘choices’’ existence, including a few luxuries.
Costs are calculated for oneand two-person households in metropolitan and provincial areas of New Zealand.
The latest report showed that all households, even those going without extras, had a gap between what they spent and what they received in New Zealand Superannuation.
In Auckland, Wellington and Christchurch, a two-person household was typically spending $872 a week for a no-frills budget, compared with income of $600.30 from the pension.
If they were living with more choices, such as travelling and eating out, they were spending $1399.72 a week.
Households in provincial centres were spending $621.48 on a no-frills life and $1104.78 with more choices.
‘‘The gap has at least doubled for most households, which is a significant change from previous reports,’’ report author Claire Matthews said.
To fund that shortfall, a metropolitan two-person household would need to have saved $266,000, or $327 a week from age 50, to provide the necessary income, or $783,000 between them for a choices life.
The report found the most significant increases in expenditure were on transport, recreation and health. Matthews said, with the exception of healthcare costs, that was a surprise.
Transport costs increased by more than $100 a week for oneperson households with a choices lifestyle in metropolitan areas and all two-person households.
‘‘Looking at transport, the increases mostly related to the purchase of vehicles and passenger transport services. When you couple this with greater expenditure on recreation, it seems some groups at least are spending more on things they enjoy doing,’’ Matthews said.
‘‘Rising health costs reflect the fact that New Zealanders are living longer and that medical products and equipment are becoming more expensive.
‘‘There may also be more retirees choosing to pay for elective procedures because they have the means to do so.’’
Matthews said 80 per cent of the retired population was earning from other sources, and spending that money.
‘‘Whether they could manage without it we don’t know.’’
But she said the increasing gap was not necessarily bad news. People might be spending more because they were better prepared for retirement.
Half of those with a choices lifestyle were still working at least part time, Matthews said.
‘‘Semi-retirement offers people options for topping up their superannuation and saving more for when they do stop working completely.’’
Westpac’s head of private wealth management, Katie Christoffersen, said it was important for people to work out early how much they would need to have saved or invested.
‘‘KiwiSaver is likely to help many people, especially if they increase their contributions to 8 per cent of their pay, and have some additional investments and a savings account. For many people, though, working into retirement will be a reality.’’
Matthews said today’s young people would have a greater challenge to prepare for retirement, but if they were contributing to KiwiSaver they would go into retirement with a nest egg of some sort.