Itâ€™s nearly Easter and what better time for taking steps to sort out your retirement nest egg. No matter your age, itâ€™s never too soon (or too late) to hatch a money plan that will help you to enjoy the lifestyle you want in retirement.
Life expectancy has risen as our quality of life improves and on average, a 65-year-old man can expect to live until they are 85 and a woman until they are 89. The majority of New Zealanders end up relying on the government pension (NZ Super) and their savings for income during retirement.
Thereâ€™s no â€˜ruleâ€™ about how much you need to save for retirement because everyone is different, but putting aside some of the money you earn now will make your retirement nest egg that much more cosy.
To work out how much youâ€™ll need, think about these questions:
- When would you like to stop working?
- What sort of lifestyle would you like in retirement?
- How does that compare to your current lifestyle?
- Will you live in your own home or rent?
If you retire at 65 you will need to have a plan that provides the income you want for at least 20 years.
Any retirement plan should include the goal to be debt-free by retirement. Pay off â€˜dumb debtâ€™ (high-interest debt such as unpaid credit cards, and hire purchase thatâ€™s no longer interest-free) as soon as possible and avoid acquiring any more.
Focus on becoming mortgage-free as soon as possible and definitely by the time you intend to stop working. Debt can be very hard to pay off once you have retired.
While being debt-free including owning a mortgage-free home in retirement is an essential part of retirement savings, youâ€™ll want to save extra unless youâ€™re happy to live on NZ Super alone. (For a couple where both qualify, NZ Super pays around $523 a week.)
Consider joining a retirement savings scheme such as KiwiSaver. With KiwiSaver, your money grows because your employer has to contribute (a minimum of 2%) and the government contributes 50 cents for every dollar you pay up to $1,042. Thereâ€™s also the $1,000 kick-start which the government pays when you join. At 64, itâ€™s still worth joining KiwiSaver because of the extra contributions you receive.
Review your retirement plan whenever your circumstances change so that you can continue to reach your savings goal. Planning ahead now will provide stability and peace of mind during retirement. Make a retirement plan and start building a nest egg so your retirement can be one you look forward to.
David Kneebone is a Sorted spokesperson.Â Sorted is New Zealandâ€™s free independent online money guide, run by the Commission for Financial Literacy and Retirement Income.