No matter your age, it is never too soon (or too late) to hatch a money plan that will help you to enjoy the lifestyle that you want in retirement.
Life expectancy has risen with improvement in the quality of our life.
On average, a 65-year-old man and woman can expect to live until he or she is respectively 85 and 89 years old.
A majority of New Zealanders rely on government pension (New Zealand Super) and their savings for income during retirement.
There is no ‘rule’ about how much you need to save for retirement because everyone is different, but putting aside some of the money you earn now will make your retirement nest egg that cosier.
Consider these questions to work out how much you would need in retirement. 1. When would you like to stop working? 2. What sort of lifestyle would you like in retirement? 3. How does that compare to your current lifestyle? 4. Will you live in your own home or rent?
If you retire at 65, you must have a plan that provides the income you want for at least 20 years.
Be debt free
Any retirement plan should include the goal to be debt-free by retirement. Pay off ‘dumb debt’ (high-interest debt such as unpaid credit cards, and hire purchase that is no longer interest-free) as soon as possible and avoid acquiring any more.
Focus on becoming mortgage-free as soon as possible and definitely by the time you intend to stop working.
Debt can be very hard to pay off once you have retired.
While being debt-free including owning a mortgage-free home in retirement is an essential part of retirement savings, you would want to save extra unless you are happy to live on New Zealand Super alone. For a couple where both qualify, it pays about $523 a week.
Join KiwiSaver
Consider joining a retirement savings scheme such as KiwiSaver.
With KiwiSaver, your money grows because your employer has to contribute (minimum 2%) and the government contributes 50 cents for every dollar you pay up to $1042. There is also the $1000 kick-start, which the government pays when you join. Even at 64 years of age, it is worth joining KiwiSaver because of the extra contributions you receive.
Review your retirement plan whenever your circumstances change so that you can continue to reach your savings goal.
Planning will provide stability and peace of mind during retirement.
Make a retirement plan and start building a nest egg so your retirement can be according to your desire.
David Kneebone is the spokesperson for ‘Sorted,’ a free independent online money guide, run by the Commission for Financial Literacy and Retirement Income.
