20 September 2016

Four mistakes Kiwis make when they approach retirement

The first rule of retirement income is ‘make sure you never run out of money.’

The second rule of retirement income is – you guessed it – ‘make sure you never run out of money.’

And yet, every day New Zealanders make decisions that increase their risk of draining the piggy bank just when they need it the most. These decisions are easily avoided – all you have to do is be aware of them.

Here are four avoidable mistakes you should be wary of as retirement becomes a reality.

Mistake 1. Failing to make the transition from saving FOR retirement to spending IN retirement.

“You’ve spent your working life saving for retirement. So what happens when you do retire and the money starts flowing the other way?"

Working patterns are different in retirement; some people stop working when they retire, some continue in their life long careers, some start new ones, and some may to choose to serve the community or just enjoy doing things differently in their retirement years. One of the greatest myths in retirement is that it’s about stopping, in our view it’s all about starting!

A rich and rewarding retirement starts with a plan to make the transition from saving for retirement to spending in retirement.

Regardless of activity, for most people New Zealand Superannuation and individual savings are taking over as the principal source of income in retirement. 

A little planning goes a very long way… A flexible plan that balances NZ Superannuation, retirement savings and new sources of income with everyday spending needs, providing for the unforeseen, family and new and exciting experiences is the first step in enjoying a rich and rewarding retirement.

At Lifetime we have a number of simple tools that will help you take control of your retirement income and make a successful transition from saving to spending.

Mistake 2. Relying on Term Deposits for long-term income.

Term Deposits have their place. They provide certainty and security. Unfortunately they don’t pay you very much interest.

As we’ve explained in a previous newsletter, global interest rates are historically low and likely to remain so for years. This is putting downward pressure on the interest rates banks can offer.

If you are relying on bank Term Deposits to provide you with a healthy and sustainable income during your retirement years, you may not like what’s on offer.

Mistake 3. Underestimating your living expenses.

Massey University has taken a long, hard look at living costs for retired people in New Zealand. Their 2015 study calculated that a no-frills retirement outside Auckland, Wellington or Christchurch would cost $419 per week for a single person and $678 for a couple.

Costs were generally higher in the main metropolitan areas, and if you wanted a retirement with some extra luxuries, you would need to add a few hundred dollars to each of those weekly budgets.

Currently, NZ Super pays $385* per week for someone living alone or $592* for a couple. No, it’s not going to be enough.

Mistake 4. Underestimating your life expectancy and outliving your savings.

It’s great news that Kiwis now enjoy a much longer life expectancy. However, many people don’t realise just how long that is.

If you reach 65 you can now expect to live another 18 years (if you’re a man) or more than 21 years (if you’re a woman). Life spans into the 90s are becoming common.

As a result you could be facing a situation where you’re retired for a third of your life, and reliant on retirement income all that time.

When you look at things in this light you need to start thinking of ways to protect your capital while still growing it. Fortunately, Lifetime Retirement Income is designed to tick both these boxes.

With its combination of managed investment funds to deliver growth, with gains locked in and longevity insurance to guarantee lifelong payments, Lifetime Retirement Income answers many of the questions retirees face.

Retirement mistakes can be easily avoided when you understand how to protect your money while guaranteeing your income.

Want more? Get a quote.

If you have a KiwiSaver account, a Term Deposit about to mature – or if you’re just interested to see how much you could receive every month with Lifetime Retirement Income – the first step is to get in touch.

Call us on 0800 254 338 or click here to get a personalised quote on your investment.


*NZ Super rates current as at 1 April 2016 with net rates based on M tax rate. The couple rate is the total paid where both qualify.