New Zealand retirement expenditure guidelines August 2012
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Date
2012
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Workplace Savings New Zealand & Financial Education and Research Centre Massey University in conjunction with Westpac New Zealand
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Abstract
There has been increasing emphasis on the need for New Zealanders to make personal provision for their
retirement, and not rely on New Zealand Superannuationi . Successive governments have taken steps to
encourage this, including the establishment of the Commission for Financial Literacy and Retirement Income
(formerly the Retirement Commission) in 1993 and the introduction of the KiwiSaver scheme in 2007.
A key question that needs to be answered by someone seeking to make provision for their retirement is simply
How much will I need in retirement? There are some guidelines to assist in answering this question. For example,
in the section on retirement planning, the Sorted websiteii suggests that key elements of that calculation are:
• the length of time a person expects to be retired, which depends upon the age at which they retire and
their expected longevity
• the type of retirement lifestyle a person wants to have
• whether a person will live in their own home
A rule of thumb that has developed is that a person needs 70-80% of their pre-retirement income after
retiring, but that takes no account of the person’s pre-retirement expenditure.
Every person’s situation is different, and therefore there is no defi nitive answer to the question of how much an
individual needs for his or her retirement. The answer will be different for each person. What a person needs
to do is draw up a proposed budget, based on his or her expected expenditure patterns. However, even that
is not straightforward because if you are not currently retired, how do you know what items you will need to
spend money on and how much you will need to spend.
There is often a perception that older people have higher health costs, while another common perception is
that older people do a lot of travelling because of their lack of work commitments. How accurate are these
perceptions, and what does it mean for retirement expenditure? These guidelines will help address these
questions, by providing information about how much current retirees spend and on what items. An individual
can then use that information to feed into his or her own draft retirement budget, and therefore be in a better
position to answer the question of how much s/he will need for his or her retirement.
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2012, pp. 1 - 18