Retirement isn’t free, and planning for it starts now. Whether you’re 25 or 55, follow these six steps from AMP’s Robyn Conway to help plan a comfortable and secure future.

Are you on track to reach your financial goals for the retirement you want? Sadly, retirement isn’t free and whether you’re 25, 45, or 55, the time to start planning for the future is now.

Most Kiwis will need to save a decent lump sum to fund more than the bare basics for their retirement. AMP Workplace Manager & Financial Adviser, Robyn Conway and her team assist everyone from minimum wage workers in their first job, right up to CEOs on huge salaries, to get ready for retirement.

Those interactions show that you don’t have to have a high salary to get on track financially, says Conway. Whatever age and stage they are at, there are six steps every working-age Kiwi can take to boost their chances of retiring comfortably.

1. Take a pause and make sure you’ve got the basics sorted. Everyone can benefit from going back to the basics. Do you have an emergency fund in place? Are you on track to paying off debt?

People who take time to get these basics sorted are better prepared to weather financial storms without having to dip into KiwiSaver or other longer-term savings.

“Most people don’t have an emergency fund,” says Conway. “This means that if something goes wrong, which does often occur, people are getting into debt to pay for essentials. An emergency fund] gives you choice and options,” she says.

The ideal emergency fund is three months’ income in savings, says Conway. Having said that, even $5 put aside regularly will add up over time.

Paying down debt is another one of the basics to get sorted. “Start with defining what those debts look like,” says Conway. Then tackle them. Some people prefer to start by paying a small debt first and snowball their repayments. The other option, which AMP advisers generally prefer, is the avalanche method by paying down the highest-interest debt first.

Whether it’s an emergency fund or debt repayment or both, start by setting up a budget, which highlights where money can be freed up to work for you. AMP has a free Budget Worksheet to help with this.

2. Think about your long and short-term financial goals. Do you want to curb your spending, pay off debt, set aside money for emergencies, save for a house, and/or invest for the future? Have you thought about holidays, tuition fees, renovations, or providing support or a legacy for loved ones? Setting objectives for spending and saving, AKA goals, helps people focus.

Once you’ve written your goals down, take them and branch them into short-term, medium-term, and long-term, says Conway. A short term goal may be saving for an emergency fund, medium term could be buying a first home, and long term might be retirement savings and KiwiSaver.

Then assign steps, tasks and timelines. “Being detailed on what it is that you want to achieve is a really great step to achieve those goals,” says Conway.

3. Maximise your retirement savings. Conway encourages Kiwis to think about what retirement might look like from a monetary perspective. “As a country, we are grossly under-prepared for retirement and we can’t rely on New Zealand Super to give [us] a dignified retirement.”

The average KiwiSaver balance at retirement currently is $51,000. Yet research from Massey University suggests that a couple living in a metropolitan area who want a retirement with choices need a lump sum of more than $800,000 to be comfortable. “There’s a significant gap between what people need and what they’re going to have,” says Conway. The good news is that small changes can really make a difference with KiwiSaver.

Whatever your age, start by ensuring you’re saving a little and often into KiwiSaver. Try to save at least the minimum of $1042.86 per year [just over $20 a week] to get the full annual government contribution of $521.43. Employers have to match employees’ savings up to 3% of salary, which is another good reason to be in KiwiSaver.

It’s best to start from your very first pay. But it’s never too late. People who start saving in their 30s, 40s, and 50s, still have decades for their KiwiSaver to grow. “Ten or 20 years can be significant in terms of maximising [investment growth],” says Conway.

If money’s tight currently, another simple step to take, which costs nothing, is to ensure you’re in the right type of fund for your risk profile. That alone can boost your KiwiSaver savings by retirement for some people. Take a look at AMP’s KiwiSaver Calculator.

4. Check your settings. Plenty of Kiwis are unaware of what type of KiwiSaver fund they’re in, let alone how much they have in their investment, says Conway. “Being in the wrong type of fund can cost you dearly over the long term,” she says.

Some KiwiSaver members are still sitting in conservative/ default type funds, which are potentially not the best options for them to be in. They may have the ability and time up their sleeves to withstand higher growth investments, says Conway.

Contact your KiwiSaver provider or financial adviser to review your current settings. That one call could be worth tens or even hundreds of thousands of dollars in retirement.

AMP’s fund finder tool helps in selecting the right fund for you.

5. Talk to an adviser Having a conversation with a financial adviser can help you bridge that gap between your current retirement trajectory and the savings you need, says Conway.

Research by the Financial Services Council [FSC] earlier this decade found that people who take financial advice get 4% better investment returns on average from their savings. When the FSC crunched the numbers it found that a 25-year-old, saving $2,500 per year, who took financial advice would be $1.5m better off at 55 than if they didn’t take advice.

“A financial adviser can help you get structure and good habits in place around what you want to achieve,” she says.

Don’t leave it too late. Conway sees people in their 50s who walk away from advice sessions wishing they’d started decades earlier. “You don’t want to be in that position.” Spread the message to the next generation to start now, she says.

If you really can’t face meeting a financial adviser, then AMP has free tools and resources on its website that can help.

6. Have a plan for when you reach retirement age – and beyond. Too many people fail to imagine their future selves. They focus on accumulating money for retirement but never think about decumulation [spending down] in retirement, which could last for 30 years or more.

Get down to detail in that plan, says Conway. Start by working out how much income you will need annually to live on, and what the shortfall is once NZ Super is deducted from that sum. Ask yourself, will you work past the age of 65, and/or how much income will you have from investments?

Consider how spending differs for 65s, 75s and 85s. A 65-year-old may want to buy the boat or bach or have travel desires. Generally they slow down in the middle stages of retirement. Later on, costs can escalate again thanks to increased health problems and care needs, says Conway.

All the free tools and resources referred to in this article are available on AMP’s website: amp.co.nz/money-month

While care has been taken to ensure that the information is accurate, AMP does not assume any responsibility arising from use of the information. This is general information and is not financial advice.