& better living How to plan, save and invest for retirement

TOM HARTMANN

It pays to start planning for retirement as early as possible. How much you need to save will depend on your own circumstances, but the sooner you start, the better the position you’ll be in when you stop working.

While NZ Super (the government pension) can help get you by, it’s your own savings and investments that will help to make retirement more comfortable and enjoyable.

Calculate how much you will need to retire

Everyone’s retirement needs are different. To work this out, think about how long you might have in retirement, what sort of lifestyle you will want, and where you will live. The retirement calculator at sorted.org.nz offers some figures of how much you’ll need to save, based on what retirees are currently spending.

How many years of retirement should I plan for?

People are living longer these days. On average, 80% of 65-year- old men can now expect to live until they’re 90, and 65-year-old women until they’re 94. These figures are based on the latest Statistics New Zealand cohort life tables.

There is no set ‘retirement age’ in New Zealand. NZ Super is paid from age 65, but you don’t have to stop working to get it. More and more people are working beyond 65 either full time or part time.

Let’s say you plan to retire at 65. You would need to save and invest, or have another plan, to provide the income you want for 25–30 years or more, and make sure your money lasts as long as you do.

What sort of retirement lifestyle do I want?

What will your cost of living be in retirement? Some costs may go up (like healthcare) while others (such as education, clothing, housing, work-related travel) may go down. If you have children, they will probably be financially independent.

The Sorted retirement calculator includes figures for more of a ‘no frills’ lifestyle, or one with a few more ‘choices’, based on what retirees are spending these days. The first is pretty basic; the second is more comfortable with some luxuries and treats. For example, a lifestyle with more choices for a couple living in the major cities might be $1423 a week, while it might be more like $1137 if they are living in the regions. You also need to think about what your goals might be in retirement – travelling to new places? Joining clubs, going out to dinner and shows? Much of this depends on what’s on your ‘bucket list’. Will I rent, still have a mortgage or own my home outright in retirement?

If you rent, you’ll need more savings to cover the cost – but on the other hand, you won’t have money tied up in a home. If you end up retiring with a mortgage, there will be that to plan for as well. Owning the place you live in debt-free reduces the risk of rent increases or being asked to find a new place to live. You’ll have more control over your finances, but you will have to take care of maintenance, insurance and rates.

Being mortgage-free by retirement is a great goal to aim for. The reason many people currently in retirement are able to manage financially is because they no longer have the burden of mortgage repayments.

Understanding how you want to live once you retire will help you to get prepared and on track to a comfortable and fulfilling retirement.

For more tools and tips to help plan your retirement, visit www. sorted.org.nz. To check if you’re on track to the lifestyle you want in retirement, try Sorted’s Retirement Calculator at www.sorted. org.nz/retirement-calculator.