How would you like to see your spending in retirement?
The Westpac Massey Financial Education Centre has just released its updated annual Retirement Expenditure Guidelines, showing that for a two-person household of over 65 year-olds, the cost of a "No Frills" lifestyle (in a city) is $872p.w (costing $272p.w more than the NZ Super currently paid to a couple); or $1,399p.w for a “Choices” lifestyle (a $799p.w gap!).
The University estimates the retirement “nest egg” needed for a couple, would range from $210,000 (for a “No Frills”, provincial lifestyle) to $783,000 (for a “Choices”, city lifestyle).
Currently 12% of NZ's population is aged 65 years or older. Statistics NZ say that by the year 2030, around 25% of the NZ population will be 65 years or older. Do we really think that the NZ Superannuation is sustainable in its present form?
Most New Zealanders aspire to and achieve a better standard of living in retirement than can be supported by NZ Superannuation. So, we all need a “freehold” home and clearly $783,000 by age 65, minimum. But that $783,000 can't be sitting in an “interest bearing” bank account, it needs to be working.
Should the cost of the goods and services we require in retirement rise by an average of 4%p.a, then in ten years the purchasing power of this capital is just $520,560. Losing the spending power of $262,440 could be just as brutal as experiencing a 33% realised loss in the Share Markets. So the key is to not realise losses from investing (from having to sell in a down market), as that's a sure-fire way to reduce your lifestyle - and don't assume headline inflation is the same rate at which life's expenses in retirement are increasing by...
How to balance off the short and long-term risks is a financial planning exercise, it’s about knowing the goals and objectives of the investor and tailoring both their accumulation and subsequent drawdown strategy. So contact us today, we can help you get on the right path.
Tony Munro CFPCM AFA
The views and opinions expressed in this article are intended to be of a general nature and do not constitute personalised advice for an individual client.
A disclosure statement is available on request and free of charge.