KiwiSaver provider suggests saving no less than $1 million for retirement

One financial coach said the ball park figure she suggested was to have saved about one-third to half the value of a person’s house. Photo / Fiona Goodall

By Susan Edmunds of RNZ

A KiwiSaver provider says there is “no way” people would want to retire with less than $1 million.

Rupert Carlyon, founder of Koura Wealth, said how much people needed to save for retirement would depend on the sort of lifestyle they wanted. But he said it would easily run into seven digits.

Carlyon said international research indicated something between 70% and 100% of a person’s pre-retirement income was needed in retirement.

He said “big spending” periods happened in the first 10 years, when people wanted to celebrate not working, and the last 10 years, when they spent it on healthcare.

“The truth though is that people are also working longer and learn to adapt. I suspect the honest truth is the number is closer to $1m than $2m. But no way would you want to retire with less than $1m.”

NZ Super pays $519 a week after tax for a single person - or two lots of $400 for a couple.

Actuaries suggest it is reasonable to forecast taking 4% of the starting value of your investment fund each year as income.

That means if you want to have $60,000 in income above the pension, you would need to have about $1.5 million.

Retirement Commissioner Jane Wrightson said it was people’s savings and investments that would help make retirement more comfortable and enjoyable.

“People are living longer these days. On average, 80% of 65-year-old men can now expect to live until they’re 90, and 65-year-old women until they’re 94.

“If you plan to stop working at 65, and many don’t, on top of NZ Super most will need to save and invest, or have another plan, to provide the income you want for 25 to 30 years or more,’ Wrightson said.

“The Sorted retirement calculator can help you with some assumptions. It’s also important to remember, if you have savings, that your spending in retirement is likely to gradually reduce over time.”

Wrightson urged people to plan for higher amounts until perhaps their early-mid 70s, when they’d be enjoying their “new-found freedom” then reduce a bit after that.

“Don’t be scared to ask for advice.”

Financial coach Liz Koh said the ball park figure she suggested was to have saved about one-third to a half the value of a person’s house.

“So if you have a house worth $1m then $300,000 to $500,000, and if it’s worth $2m, then twice that.”

She said the cost of a house was a proxy for lifestyle and the area that people lived in.

“Cities are much more expensive to retire in.”

Koh says you’re not alone if you don’t have $1m to retire on.

“There are few people who have $1m to $2m.”

An 18-year-old starting out in KiwiSaver earning $50,000 is on track to save about $340,000 by 65 in a growth fund, but that assumes no withdrawal for a first home.

To save $500,000, that person would need to save more like 6% of their income - or have their income increase faster than average over their career.

-RNZ