Managing money in retirement

How to turn life savings into steady retirement income

Life after we stop working can mean having to live on less than before, so we’ll have some choices to make. 

After ‘accumulating’ funds in schemes like KiwiSaver for decades, drawing down on them after we pull back from working is called ‘decumulation’.

How much money should we use at a time? Will we run out? Where should we keep our funds over such a long period?

It takes some forward thinking and savvy decisions in order to make that money last for what can be 30 years or more in retirement.

Applying for NZ Super (and other government help)

Government help is available and there are other choices that we can make to keep our money flowing when we pull back from work. Going into retirement doesn’t mean we stop earning income. From the age of 65 most New Zealand residents receive NZ Super every fortnight. Here’s what you need to know about NZ Super.

You can apply for NZ Super three months before turning 65. You’ll have to make sure you’re using the right tax code when you apply for NZ Super, which depends on any other income you’re receiving. You can find out more on this NZ Government website.

Other government help

You may qualify for extra help from the government, depending on your individual situation. This could include help with ongoing health and medical costs (Disability Allowance) and housing costs (Accommodation Supplement).

You may also qualify for other assistance – for example,  in an emergency situation, or if you need help with essential costs.

For more information, call Senior Services on 0800 552 002, contact your local Senior Services centre (usually located within Work and Income), or visit


Withdrawing from KiwiSaver

After you reach 65, you become eligible to withdraw your KiwiSaver.

That includes your contributions, your employer’s contributions, the government's contributions, plus investment returns – without paying more taxes.

How fast you open the tap is up to you: keep it off for now and leave your money invested in KiwiSaver, open it slightly to drip-feed some income, or open it right up to spend or invest the entire amount in a different way.

There’s no rush – you can leave your money where it is while you work through all the issues and decide. If you want to make regular withdrawals, there may be a minimum amount required or some fees.

How do you access your KiwiSaver? Contact your KiwiSaver provider directly to find out what’s involved and to make arrangements.


Managing your retirement money

Many new retirees literally have a ‘wealth’ of options as they gain access to the funds they have built up over a lifetime. There are many choices to make on how to manage it.

The stakes are high, since no one draws down their money more than once, or gets any practice runs before cracking open a nest egg. No pressure, but it will be hard to recover our funds or build them up again if anything goes wrong.

The other important thing to know is that people don’t typically spend consistently throughout retirement. There are usually higher expenses early on (as we tick off the bucket list). Spending generally then falls during the middle stage before picking up later in life due to health costs.

So studying our options, planning and getting quality advice become more important than ever.

How to estimate your retirement income

Sorted’s retirement calculator can help give an idea of how long your money can last through the years. By setting your age to just before 65 and then inputting a certain amount of retirement savings, it shows how much steady income might be expected from a balanced fund.

This rough estimate is based on using up all your funds during your lifetime. You can also input different longevity numbers to get an alternate picture of how things could play out.


How much retirement money should you use at a time?

Rules of thumb for withdrawing your retirement money

The retirement planner shows just one way to draw down our savings, using a rule of thumb called the ‘life expectancy rule’. This means we’re stretching our savings for as long as we estimate we’ll live. It’s not the only one, however.

The New Zealand Society of Actuaries has offered four rules of thumb that can help us make decisions on how to draw down our funds. These are good for different situations, so they can give us a broad steer. Here are the four:

Four rules of thumb for withdrawing your retirement money


The Life Expectancy Rule

Each year, take out the current value of your savings divided by your average life expectancy at that time. This is for those who want as much income as possible during retirement and are not focused on leaving an inheritance.


The 6% Rule

Each year, take out 6% of the starting value of your savings. This is good for those who want to spend more at the start of retirement, when they are more active, and who are not focused on leaving an inheritance.


The Inflated 4% Rule

Take 4% of the starting value of your savings, then increase that amount each year with inflation. This works well for people worried about running out of money, or those who want to leave a legacy.


The Fixed Date Rule

Run down your savings to a set date. Each year, take out the current value of your savings divided by the number of years until that date. This is good for those who are okay with living off of NZ Super after their chosen date.

Where to keep your retirement money? Think three buckets

During retirement, there are three challenges to overcome with the money we have:

  • Liquidity: For the short term (0–3 years), you need money to live on and cash on hand in case of an emergency.
  • Income: For the medium term (4–9 years), you need money invested that can spin off a regular income for when you’ll need it.
  • Inflation: For the long term (10 years plus), you need money invested that can keep up with inflation. Money loses its buying power over time, so in the long term it can’t be just stuffed under a mattress – by the time you’re ready to spend it, it will have lost much of its value.

The solution to these three challenges is to have your savings in three buckets:

  • The short-term one can hold cash.
  • The medium-term bucket can be filled with income-producing investments such as bonds.
  • The third long-term one can hold growth assets such as shares or property.

Spreading funds across all three buckets helps prepare for decades of retirement. It all comes down to when you will need to spend the money – and you can invest accordingly to match your needs.

You’ll need to review your situation each year and move money from long term to medium term, and from medium to short. This helps to make sure your savings will be there when you’ll need them.


Budgeting for retirement

Getting close to retirement? It might be a good time to work out a detailed budget.

Everyone can benefit from having a budget – a plan of what money you expect to receive and how you expect to spend it. A budget is one of your best tools for managing your money, whatever your age.

Think about what future weekly expenses might be in today’s money. You may head into retirement with costs such as rent or mortgage payments. These can take up a large portion of retirement budgets. Take basics into account, too, such as insurance, maintaining the house and car, or replacing a major appliance.

Build in some funds for the unexpected, such as dental care. Think about the big things that might need to be paid for later on as well – like a new car, new roof or repainting the house.

You can make your retirement budget with our budgeting tool.


Extra support in retirement

Day-to-day expenses

The SuperGold Card is a discounts and concessions card available free to all New Zealanders who are aged 65 years or over, and those under 65 years receiving NZ Super (as a non-qualifying spouse or partner) or the Veteran’s Pension. Using it regularly can help save money on day-to-day expenses.

The SuperGold website has up-to-date listings of all discounts available with the card.

For more information:

Healthcare costs

A Community Services Card can help with the cost of healthcare. If you qualify, you’ll pay less on some health services and prescriptions.

If you're eligible for a Community Services Card, this will be indicated on the back of your SuperGold Card. For more information, or to apply for a Community Services Card, call Senior Services on 0800 999 999 or visit a Senior Services centre.

Protecting your assets

It’s good to know that the things we’ve worked hard for during our life are protected. Here are our guides to put a will and enduring powers of attorney in place.

You may need to review your insurances once retired. You also need to know your financial affairs will be handled as you would like if you become unable to make decisions.

It's important to review insurance cover regularly during retirement. If you not longer have dependants and are debt free, you might reconsider your need for life-insurance.

Don’t know where to start?

Check out our 6 steps Get Sorted programme to get you on track.

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