A happy retirement isn’t just about money, however, money gives you options and choices. The goal is to still have cash in our pocket to top up NZ Super and KiwiSaver, and be able to afford to continue doing the things we love.
Probably the biggest mistake that people make with their retirement planning is underestimating how long they will live for. You are likely to now survive well beyond 85. Therefore, the old ‘rule of thumb’ of a 15-20 year retirement is outdated, and if you calculate retirement funds on this basis, you are likely to outlive your retirement capital.
We break retirement planning down into three stages:
Why not start with a budget? Calculate how much you need to run your home and lifestyle. You may still be working part-time and hopefully NZ Super and KiwiSaver will cover your living costs. If it doesn’t, you could consider a lifetime annuity (with access to capital) or top up with savings.
We then plan for each retirement stage separately. You are going to need more money in the early years when you’re ‘living it up’ and less in the latter years when you just want to be comfortable.
People often like to rely on their term deposits but historically with long-term term deposit rates only being between 3-4% pa, they are really not going to cut the mustard to eek your savings out.
Term deposits do still have a place in retirement planning, however with increasing life expectancy, the reality is that we need to change our thinking, away from just the dwindling money stash in the bank.
We need to be looking at long term investments staggered between Conservative, Balanced and Growth portfolios, to allow our funds to build and ensure that funds are always available but money that isn’t needed for 10 to 15 years is still working for you. The returns stack up and it will ensure that you are less likely to outlive your retirement funds.
Come and see us for help with your retirement planning and use Foresight to have the retirement you want.