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.
Other ways to generate income from your home
There are other options you can consider to release value from your home:
- Rent out part of your home
- Take in a boarder
- Subdivide your property
- Sell your home to family or whānau (while retaining the right to live in it)
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