A guide to saving for retirement
Retirement can mean different things to different people. It used to be working until you were 65 and then stopping work entirely. Now, you could retire before then, keep working beyond, or have a series of ‘mini-retirements’ throughout your career.
Currently, when you reach 65, you’ll receive New Zealand Superannuation. For most people, this won’t be enough money to live off. Put some thought into what kind of lifestyle you want to lead and how much money you’ll need for it. Calculating the amount you’ll need to retire will help you save for life post-work. For younger generations, there's also a risk NZ Super might not be around in the same form when you hit retirement age. It’s good to be prepared.
If you want to retire before 65, think about how much extra you’ll need to fund a longer retirement. Also, how you’ll invest the money so it’s ready to use when you need it.
Save and budget for the retirement lifestyle you can afford.
Be prepared to spend less as you get older due to changes in lifestyle, priorities, and health. What you need when you’re 65 may differ when you’re 80.
Factor in how many years of retirement to plan for. For some, this could be more than 25 years. For those currently approaching 65, one in five men will live beyond 93 and one in five women will live beyond 95.
The most common employee KiwiSaver contribution is 3%, matched by employers. Some employers do contribute at a higher rate, but it’s not the norm. Every year, if you meet the conditions, you’re eligible for a Government contribution of up to $260 for the first $1043 you put in. This adds up over a lifetime, so it’s worth ensuring you at least get this.
Remember, any money that goes into your KiwiSaver can't be accessed until you reach 65 — unless you’re using it to buy your first home, or under very special circumstances. Increasing your contributions is an option, but it depends on whether you’re comfortable with that money being locked away.
Ensure you meet the requirements to get the government contribution.
Consider supplementing your KiwiSaver with other investments. Investing in managed funds through Tempo gives you more options.
Start saving early to ensure you meet your retirement goals, even if retirement seems far away.
The exact amount you might be able and willing to save will depend on your circumstances. Ideally, you might put 10-20% of your regular paycheck into some form of savings or investment. While this might sound daunting, every bit helps, so set aside what you can at this point and look to grow the amount over time.
In the future, you could save your next pay rise rather than increase your spending. There are a range of ways your savings can be put to work for you to grow your wealth over time.
Think about putting your money into diversified managed funds, like the ones Tempo offers, if you want to save longer term. Generally, these are expected to have higher returns over time, but are higher risk than cash, bonds, or term deposits.
Consider savings accounts or term deposits, if you think you’ll need your money in the short-term. Generally, these types of lower-risk investments provide more stability over the short term.
Property might be an option which can provide you with an income via rent and/or capital gain. Make sure you consider all the costs associated with a rental such as insurance, council rates, maintenance and downtime when you might not have tenants.
Foster your relationships, friendships, and other social connections. Your support networks are essential, as you transition – and grow – into this next phase of your life.
Revisit or explore new hobbies.
Join clubs or other groups that involve social interaction.
Make sure you have something to focus on post-work.
Enjoying a comfortable retirement should be the reality for every Kiwi. Putting your money into KiwiSaver is a great start on your journey to life post-work.
If you want your money to work a little harder, outside of KiwiSaver, Tempo can help. With the power of saving, investing and some planning, you can set yourself up for the retirement you deserve.
Tempo’s financial advice is designed to provide you with an appropriate mix of investments to manage your risk, regardless of your goal’s duration. For goals that are still many years away, this often means a higher proportion of growth investments to help build your wealth over time. As you approach retirement—especially if you plan to start using your money soon after—Tempo will recommend a shift toward lower-risk investments. This is because shorter timeframes leave less time to recover from any market volatility.
If you’re nearing retirement and planning to access most or all of your money shortly, a lower-fee option may be to invest in lower-risk investments directly. However, investing through Tempo gives you simple, guided access to a risk-appropriate mix of investments that adjust as your retirement approaches.
External links on this page
We have provided a number of links to relevant external websites which we believe to be reliable. However, the information on these external websites (including information provided through the use of online tools) is prepared, managed, and provided by other organisations and businesses, not by us. To the maximum extent permitted by law, we accept no responsibility for the accuracy or availability of the information on those external websites. We also receive no payment for including these links.
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