Retirement Life
19 June 2024

Retirement saving is changing

The days when you stayed in a job for forty years and were farewelled with a gold watch as soon as you turned sixty are well and truly gone. Thank goodness for that. While the ‘job for life’ was a comfortable option for conservative people with a sedentary lifestyle and reluctance for change, for many it simply reflected a lack of other career options, especially for women.


Changing times

In today’s fast-changing world, career options are seemingly limitless and, given the impact of technology, career changes are arguably mandatory. Life is quite the opposite now of what it was.

Whereas the change between working life and retirement once happened overnight – working one day, retired the next – it is now possible to design your own path to retirement. Along with that comes the need to employ different strategies for accumulating retirement funds.

In the old days

Traditionally, when retirement occurred on a known date, the strategy was to squirrel away money as quickly as possible so that on the determined day, after which the opportunities for other work were virtually nil, you could live out your remaining years in comfort.


For those unable to save much, there was always the government pension (NZ Super), which provided an adequate standard of living. Of course, life expectancy was much different then, and the life of leisure, which I am sure for some was a life of boredom, didn’t tend to last as long as it does now.

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Retirement has changed

Increased longevity, and better, more interesting options for older workers mean that the nature of retirement is changing. It’s less about not working at all and more about choosing a different way to work, whether that be working less, setting up a business or switching to something less demanding or more rewarding.


In fact, it is possible to move in and out of retirement, by taking breaks in between jobs. In these scenarios, less focus is needed on acquiring a large sum of money for retirement. The income required to top up a meagre NZ Super can come not from investments alone, but from paid work too.


So has investing for retirement

This has a number of different implications for managing retirement money. Working for longer means you potentially need less income from investments, which allows investment portfolios to be invested for longer-term growth rather than in conservative, income-producing assets. This generally means better investment returns over the long term. It also means retirement portfolios can be smaller – or alternatively, that those over the age of retirement but still working can enjoy a much higher standard of living than those who choose not to work.


Beware the risks

However, it also changes financial risk. If the ability to earn is relied upon to fund retirement, what happens if those earnings don’t materialise? Poor health, redundancy, ageism in the workplace, and host of other things may lead to loss of earnings. Investment portfolios need to be able to make up the difference at short notice if required.

Financial flexibility is key to allow for the choice not to work for periods of time. In planning a retirement portfolio, investment time frames are critically important. Funds required at short notice need to be matched with investments that are not likely to fall in value, while funds invested for the long term need to be invested in growth assets to provide a return that keeps ahead of inflation and tax.

The complex equation

Managing retirement portfolios is complex and will become more so as people choose to design their own path to retirement. Portfolios will need to strike the right balance between providing income, growth and liquidity, while being flexible enough to shift that balance over time as needs change. The traditional approach of building up a large lump sum and investing it to provide an income for life was so much simpler!


If you’re keen to find out how much income you could generate from your retirement savings, check out Lifetime’s retirement income calculator at the link below. 


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Written by:

Liz Koh

Liz Koh is a money expert who specialises in retirement planning. The advice given here is general and does not constitute specific advice to any person.

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