How to plan, save and invest for retirement

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. Our retirement calculator 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. Here’s where to estimate your life expectancy. 

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.

Our 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.

Figure out where your retirement money will come from

Seeing that you could be retired for 30 years, you’re going to need money coming in. From the age of 65 most New Zealand residents receive NZ Super every fortnight.

Close to 40% of New Zealanders over the age of 65 rely on NZ Super alone. However, most retired New Zealanders also live off their own savings in addition to NZ Super.

Take a look at the current rates of NZ Super. Would that be enough to live on?

Most likely, there will be a gap between the income NZ Super provides, and the income you want in retirement. So you’ll need to have other sources when planning for retirement needs.

NZ Super

New Zealand Superannuation is the pension paid by the government to most New Zealand residents from age 65.

Any eligible New Zealander receives NZ Super regardless of how much they earn through paid work, savings and investments, what other assets they own, or how much taxes they have paid. Here's what you need to know about NZ Super as well as this year’s NZ Super rates. 

Savings and investments

You may plan to spend money you have saved and invested to fund your retirement years. You can use our retirement calculator to work out how much to save and invest for your retirement goals. Setting your long-term goals can help you make decisions on how to invest.

The more dependent you are on your savings, the more careful or 'defensive' your investment approach should be.

Once you have built up a nest egg for retirement, you’ll need to make savvy decisions on how to stretch it over what can be 30 years or more. See our guide to manage your retirement money.

KiwiSaver

The extra benefits KiwiSaver offers make it a great option for retirement saving.

As well as the money you put in, there are the annual contributions that KiwiSaver members receive from the government. Employees get contributions from their employer. All that money is then invested by a KiwiSaver provider and grows from earning returns. This extra money means your own savings will produce higher returns than another option where you are the only one who contributes. That will make it easier to reach your retirement savings goal.

When you reach 65 and you’re ready to use your money to live on in retirement, you can arrange regular withdrawals with your KiwiSaver provider.

Here’s why KiwiSaver is worth it, and you can estimate your future results with our KiwiSaver calculator.

Iwi-based savings schemes

Iwi-based schemes, such as Ngai Tahu’s Whai Rawa, can provide a meaningful part of retirees’ income and investments. Whai Rawa, for example, is a managed investment scheme that was set up for Ngāi Tahu whānui by Te Rūnanga o Ngāi Tahu in 2006. It aims to improve the wellbeing of Ngāi Tahu whānau by providing a vehicle for distributions to eligible whānau. Whai Rawa members can withdraw their funds for three key financial goals: tertiary education, first home ownership and retirement from age 55.

Working in retirement

There are a variety of reasons why people keep working in retirement – many enjoy the work or may need the money, but others may need to step back entirely because of their health. Around a third of Kiwis continue some form of paid work past age 65. You may continue working as you are or do so in a different way – such as with flexible hours, part-time or casual work, consultancy or mentoring.

Income from paid work will not affect your entitlement to NZ Super. However, it may affect your eligibility for income-tested benefits such as the Accommodation Supplement or the Disability Allowance. Senior Services has more information on 0800 552 002.

Downsizing your home

Selling a house and purchasing a cheaper one that is smaller or in a cheaper area can free up some money while still providing the benefits of owning a home.

You may be planning on downsizing and moving to the regions when you retire, but this doesn’t always work entirely as well as intended. There are trade-offs to make in terms of your social network and access to services, which may mean living closer to a main centre remains preferable.

Reverse mortgages

If you own a house or other property and need to free up some money for long-term living expenses, pay for emergencies or a major expense, you can use a ‘reverse mortgage’.

This is where you borrow an amount against your property either in a lump sum or by drawing down on the loan as and when you need the money. In the meantime, the interest payments build up. When you die or the property is sold, the full loan plus interest must be repaid – so you will leave behind a smaller legacy.

When considering a reverse mortgage, it’s good to talk about it with family and get independent financial and legal advice. It’s important to understand how the product works and what it might cost (including fees and interest charges). You can take a ‘worst-case scenario’ view when working out the cost projections – and not assume a property will increase in value. Consumer NZ has more information on reverse mortgages, too.

Debt-free equity release

Instead of borrowing against the value of your home with a reverse mortgage, in New Zealand you can also sell a portion of your home and receive a steady stream of income to top-up your NZ Super. You essentially sell part of your equity to a company, which then provides you with a regular fortnightly income for 10 years. You can stay in your home for as long as you like, but when the property is sold the company receives its share of the proceeds (typically 35%) while you keep yours (65%). For more about how this works, see Lifetime Retirement Income.

Although this way to release equity is an interest-free option (it is not a loan), it's important to understand the costs that come with selling part of your home. We highly recommend independent financial advice to understand whether this is a good option for you.