It's now or never
What's the best age to retire – or shouldn't you care?
Many younger workers dream of retiring well before 65. But as people get their first grey hairs they begin to realise they want – or need – to work well beyond the age they qualify for NZ Super.
A third of under 35s say they want to retire before they hit 65, with another 38 per cent planning to down tools the day they reach 65.
But if these are their optimal retirement ages, they will have to do a lot better than their elders, because OECD data shows New Zealanders have some of the longest working lives in the developed world.
Only men and women in the culturally work-obsessed Japan and South Korea, and the Latin American countries of Mexico and Chile, have a later ‘‘average effective’’ retirement age, OECD data shows.
The average effective age of retirement in New Zealand is 69.8 years for men, and 66.4 years for women, the OECD says.
‘‘Never,’’ is septuagenarian farmer John Dickson’s blunt response to when would be his optimal age to stop working.
‘‘Working keeps me alive. I get up in the morning, and I have a purpose,’’ he says.
‘‘I have seen so many farmers retire, buy a nice house in town, and get bored because they have nothing to do, and they die.’’
Dickson, who suffered a business failure as a result of the incompetence of a government agency in the 1980s, has however cut back on his work.
Retirement Commissioner Jane Wrightson says: ‘‘The optimal retirement age is when you are ready. It’s as simple as that. Some people are well ready at 65. Some people are not ready at 85.’’
And, she says, research shows most people don’t do a ‘‘hard stop’’, downing tools entirely, instead preferring to cut their work hours, rather than stop entirely.
‘‘Most people don’t hard stop anything in their lives,’’ says Wrightson, who heads the Commission for Financial Capability (CFFC).
‘‘It’s the sensible way of doing it. If you have been working for a long time, it’s a massive adjustment. Why would you just stop?’’
The idea of an ‘‘optimal’’ retirement age also has little currency for some younger workers.
They aim not to retire early, but to build financial wealth, so they can choose to work however, whenever and at whatever, they want.
Sam Lind, 35, from Dunedin technology company Oritain, plans to achieve financial freedom much earlier than previous generations aspired to, but the endeavour is not about planning for retirement.
Lind is one of the administrators on the Kiwi Mustachians Facebook page, which boasts 3500 members, all dedicated to the Mr Money Moustache financial philosophy of living frugally, investing hard, and building wealth fast.
‘‘Historically, retirement meant you gave up work, but the concept is to get the financial freedom to pursue whatever I desire with the remainder of my life,’’ Lind says.
‘‘There are a lot of people who are financially free who are still working, or working in other areas.’’
Lind does not intend to be among the majority of people who wait for the ‘‘permission’’ to retire that comes with getting NZ Super at age 65.
Lind says Mustachians tend to be professional, and highearning enough to salt away a reasonable portion of their earnings, not just the 3 per cent most KiwiSaver investors save.
The founder of the movement, Canadian-born blogger Peter Adeney, describes saving 50 per cent of your income as ‘‘reasonable’’.
‘‘We have the luxury to be able to think about investments,’’ Lind says.
Lind’s words ring true with Dr Joanne Allen, a researcher from Massey University, who is part of a group conducting a long-term ageing study that next year should for the first time accurately reveal just how many people achieve their optimal retirement ages.
‘‘It’s very easy to fall into the idea of volition, that you get to choose your retirement age,’’ Allen says.
Researchers at the British Department for Work & Pensions in 2014 found most people who ‘‘retired early’’, didn’t do it voluntarily, instead falling prey to ill-health or redundancy, or because they had to care for others.
Wrightson does push back against people who profess not to understand why people fail to achieve a prosperous retirement.
‘‘Life is a crap shoot. Some of us are luckier than others. Some of us have awful misfortune. The only way you can offset that is having planned for some of those potential misfortunes, and not all of us can do that,’’ she says.
Data shows the strongest determining factor around the world for when people retired was the retirement policies in their homelands, says Allen.
That includes in New Zealand, where many people do actually stop work at age 65, when they qualified for NZ Super, though New Zealand had what Allen called an ‘‘open’’ retirement policy, where people were free to take the state pension, and carry on working.
That allowed people who could carry on working to save rapidly, banking NZ Super, and living on their wages.
Though there is pressure to lift the age of eligibility for NZ Super to reflect longer, healthier lives, and slow the increase in the cost of NZ Super, there are many people, including a disproportionate number of Ma¯ ori and Pasifika people, whose health indicates they should retire before 65, Allen says.
‘‘We find people who have been in labour-intensive jobs see their physical wellbeing pick up a little bit when they give up work,’’ she says.
Wrightson says: ‘‘If your body is broken, you are well ready to retire at the earliest opportunity,’’ she says.
‘‘Sixty-five is an arbitrary number. There are some people who don’t get to 65,’’ she says.
Health is a major determining factor in when people retired.
The New Zealand Health, Work and Retirement Longitudinal Study found people in robust health were more likely to be working than people whose health was declining.
Wrightson sees preparation for retirement as both financial, through amassing wealth, and psychological, through building human connections, and a sense of purpose.
‘‘Finding ways to make yourself happy and contented in your retirement is certainly on a par with having the means to give yourself some choice,’’ she says.
‘‘Those who can’t find their purpose will be the most unhappy of all, whether or not they have money,’’ Wrightson says.
Financial adviser Lisa Dudson, 52, recalls that when she started out in her industry the talk was all about amassing wealth to retire early.
‘‘Back in the 1990s there was a lot of talk about aspiring to retiring early, but as people get older, the more they wonder what they would do all day, if they did,’’ she says.
Dudson built herself a financial advice business, and also built wealth through property development.
‘‘My first goal was to make my first million, but the day after I made it, I didn’t feel any differently,’’ she says.
She came to realise that generally people do not want to be idle, leisured beings, but they do want to work less.
‘‘People want a fulfilling life,’’ Dudson says.
‘‘Historically, retirement meant you gave up work, but the concept is to get the financial freedom to pursue whatever I desire with the remainder of my life. There are a lot of people who are financially free who are still working, or working in other areas.’’ Sam Lind
‘‘My partner and I haven’t needed to work for a while, but we haven’t given up work. Why would we when we love what we do?
‘‘We do travel and work a lot. Both of us have a reasonable amount of control around how we work,’’ says Dudson, who spoke to the Sunday Star-Times from Rakiura Stewart Island where she was tramping, having been up early getting her emailing out of the way before heading out to Ulva Island, where she saw kiwi in the wild.
‘‘We spent a month in Bali 18 months ago, working from three to five hours a day. We’d finish by lunchtime. We loved it,’’ Dudson says.
Dudson wonders if younger workers, who may be more subject to the diktats of their bosses, feel differently about work later in life, when potentially, they have more self-direction.
CFFC’s polling reveals that fewer workers in their 50s and 60s aspired to retiring before they reached the age of 65, than younger workers.
It also revealed a likely reason. Younger workers were less likely to know how much they’d need to live decently in retirement, or how much they needed to be saving to be able to retire at their optimal age.
A survey done by BNZ in 2018 revealed a similar divide between older and younger workers.
Even before the Covid economic crisis, many young people were struggling to see how they could save enough to generate a decent income in retirement.
Not only were interest rates cut by central banks to stimulate economies, meaning retired people got lower returns from deposits and fixed interest bonds, but house prices spiked, trapping the young into larger mortgages, or out of the housing market entirely.
In 2015, BNZ warned larger home loans meant that as many as a third of people could retire not having paid their mortgage off.
In 2020, the bank’s Wellbeing Report 2020 indicated six in 10 people feared their wealth and income today would not prevent them from slipping into a life of bare-bones hardship in retirement.
This fear was pervasive across Kiwis, with 60 per cent of people believing they would have ‘‘not quite enough’’ or ‘‘not nearly enough’’ savings on retirement.
Those with the bleakest view are young workers expecting the age of eligibility for NZ Super to rise.
CFFC’s polling shows 22 per cent of people aged 18-35 think they will still be working after they turn 70.
Martin Hawes, New Zealand’s most prolific financial author, says each person’s optimal age for retirement varies on their circumstances, and wishes, and also family culture.
‘‘My father worked until about six months before he died. He practised medicine.’’
Hawes’ father eased off in his late 70s, Hawes says.
‘‘I have the same sort of idea,’’ he says.
The only thing that would prompt Hawes to stop working was that he was determined to go out on a professional high.
‘‘I don’t want to outstay my welcome,’’ he says.
He feels that working parttime gives extra enjoyment to the times he is in the great outdoors, which he loves, or spending time with family.
‘‘They are more enjoyable because I can’t do them every day,’’ he says.
‘‘Idon’t think many people give up work at all,’’ says Wrightson. ‘‘They just give up paid work.’’ Retired people do more than their fair share of volunteer work in Aotearoa New Zealand, choosing to put in the hours for the good of the community after they retire.
Volunteering NZ says Ma¯ori and Pa¯keha¯ are the two ethnic groups that volunteer most, though how each sees this unpaid work is different, and their ‘‘retirements’’ are different.
The peak body for volunteering says for Ma¯ori ‘‘Mahi aroha’’ – work done out of love – is deeply rooted in Ma¯ ori culture.
‘‘Mahi aroha is performed out of love, sympathy or care and through a sense of duty for wha¯nau, hapu¯, iwi and other Ma¯ ori organisations and individuals,’’ it says.
‘‘As such, mahi aroha is central to Ma¯ ori sense of identity and for maintaining Ma¯ori culture and traditions as well as fulfilling their cultural obligations to the wider collective.’’
For Pa¯keha¯, the urge to do unpaid work in retirement is to ‘‘give back to the community’’, research from Volunteering NZ shows, in an act of rebalancing the ledger, feeling that they have perhaps taken more than they have given. And Pa¯keha¯ are also seeking company, with ‘‘to make friends’’ coming in second only to giving back as a motivation for volunteering.
The difference in how Ma¯ori and Pa¯keha¯ see unpaid work in retirement is a reminder to researchers to bring a cultural lens to retirement, and a second research programme under way aims to fill this research gap.
Wrightson says CFFC is conducting research on what a Ma¯ ori retirement looked like, due to be published towards the end of the year.
‘‘Life is a crap shoot. Some of us are luckier than others. Some of us have awful misfortune. The only way you can offset that is having planned for some of those potential misfortunes, and not all of us can do that.’’ Jane Wrightson Retirement Commissioner