Most retirees short by more than $200 a week

The gap between income reality and expectation for New Zealand retirees is not close enough for comfort, a new in-depth survey has confirmed.

According to the study published by the Financial Services Council (FSC) in December 2017, NZ retirees have, on average, a shortfall of more than $200 each week between actual income and the level they "believe would make their lives comfortable".

"...and 69% have a larger income gap", the FSC study says. 

In nominal terms, the average weekly income for retired people over 65 sits at $437 versus the comfort zone of $655 per week. 

For those post 65 and still working, the figures look better: on average this group brings in weekly income of $744, the FSC survey says. But even this working group (representing about 30 percent of all over-65s) has concerns about sustaining enough income for the duration of an expected 20-plus years in retirement.

"Only 31% of those 65+ expect to have an income that matches or exceeds the amount they feel they need," the FSC report says. 

That large distance between projected income and perceived income needs comes despite the huge amount of wealth collectively accumulated by the post-65 age group in New Zealand.

However, the FSC study says most of that retiree wealth is invested in property - with a total estimated value of $623.2 billion - of which about half is locked up in the non income-producing family home.

Aside from the government pension, the FSC identifies 15 other sources of wealth retirees access to fund their lives with the most popular including interest derived from bank savings accounts (48 per cent) and term deposit interest (43 per cent).

"Some 19% are receiving share dividends and 11% income from bonds or debentures, while 10% use KiwiSaver funds and 9% have money from superannuation schemes other than KiwiSaver," the report says.

While rental property provides a healthy average weekly income boost of $360, just 5 per cent of retirees belong to the landlord class.

"Those who do expect to have enough to live comfortably are those whose assets are moe diversified," the FSC says.

Almost 40 per cent of over-65s report earning income from a mysterious 'something else', according to the survey, but a large proportion of retirees are now offloading assets as investment returns fail to keep up with spending needs.

The FSC study says "26% are selling residential properties, 8% shares, 7% debentures and 36% other assets".

However, in spite of their best efforts in managing their assets, the majority of those aged over 65 expect to rely entirely on the government pension within 10 years of retiring,

"They expect to live the last 10 or more years of their lives on the government pension only", the FSC report says.

The study found a wide diversity of attitudes among over-65s in how they planned to manage their own assets during retirement ranging from drawing-down the same amount each year until the money is exhausted, to carefully stretching out their income with the intention of leaving a bequest.

But the FSC, an industry body representing a number of insurance and wealth management firms, also picked up a significant latent demand among retirees for professional guidance on how to make better use of their assets.