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Cost of living increases have continued to put pressure on retirement budgets, despite the inflation rate dropping.
Retirees are still spending at levels that exceed the New Zealand Superannuation.
Experts are stressing the need for additional savings as retirees are spending beyond NZ Super, driven by the high cost of living.
According to the latest New Zealand Retirement Expenditure Guidelines, housing, household utilities, transport, and insurance were the primary drivers of rising costs for retirees over the past 12 months.
Associate Professor Claire Matthews said the research highlights the need to plan for retirement.
“Many New Zealanders hope for a higher standard of living in retirement than what NZ Super alone can provide.
“As a result, it’s crucial to recognise that the landscape of retirement planning is always changing.”
Most New Zealanders aiming for a comfortable standard of living will need income beyond the superannuation, Massey University’s Financial Education and Research (Fin-Ed) Centre found.
“Regularly reassessing your retirement plans to account for external factors is essential.”
The Fin-Ed Centre categorised expenditure into two levels: “no frills”, reflecting a basic standard of living with minimal luxuries, and “choices”, which represents a more comfortable lifestyle.
For a two-person “no frills” household in a metropolitan area, the total weekly expenditure is $909.90, while a similar household in a provincial area spends $1031.85.
The report identifies “key contributors” in the lower expenditure of the two-person “no frills” household in a metropolitan area, compared to that of the “no frills” household in a provincial area, as a lower level of expenditure on recreation, culture and transport.
Households aiming for a “choices” lifestyle in a metropolitan setting spend $1739.85 per week, while those in provincial areas spend $1210.18 per week.
The figures significantly exceed the NZ Super payment of $799.18 after tax.
Financial Advice New Zealand chief executive Nick Hakes said the “choices” lifestyle in a metropolitan setting overtakes the provincial setting in expenditure for the same reason as with the “no frills” lifestyle.
“The same rationale applies in that in a metro setting you’ve got more expenditure in that discretionary, cultural area,” Hakes said. With a “choices” lifestyle there’s more opportunity to spend on recreation and culture in a metropolitan setting.
Claire Matthews is an associate professor at Massey University business school. Photo / Supplied
The data takes into account different regions, comprising metropolitan and provincial areas, and covers both one-person and two-person households.
These figures have risen compared to 2023, primarily due to inflation and changes in the data source, which now comes from the 2023 Household Economic Survey (HES).
However, the report also reveals a slight reduction in the projected lump sum savings required to support retirement, suggesting that many households have adjusted their spending to mitigate the impact of inflation.
“What’s interesting is that those already in retirement, we can see that their patterns of spending have shifted as a result of the cost of living crisis, goods and services going up. So they have shifted their spending to reflect those increasing costs,” Hakes said.
Matthews said that while Generation X should be focusing on retirement savings, it is also the time for Millennials to start planning.
“The focus for retirement planning is undergoing a generational shift, with the first of Generation X now facing retirement in the foreseeable future.
“In 2029, the last of the Baby Boomer generation will reach the traditional retirement age of 65, when they will receive the New Zealand superannuation, with Gen X following in 2030.
“While Millennials have more time, the first of that cohort are now around 20 years from reaching age 65, making it an opportune moment for them to begin retirement planning.”
Jaime Lyth is a multimedia journalist for the New Zealand Herald, focusing on crime and breaking news. Lyth began working under the NZ Herald masthead in 2021 as a reporter for the Northern Advocate in Whangārei.
