Too many people retire without a firm plan for how they’ll generate a reliable long-term income to supplement NZ Super and support a comfortable retirement. Part of the problem is we just don’t talk about it enough.

Think of retirement as life after KiwiSaver. In the workforce we’re bombarded (in a good way) with messages about the importance of saving for retirement; how much, how to, and who to do it with. Yet, once you hit 65, you’re handed the keys to your KiwiSaver account and largely left to your own devices. Even though working out how to pay yourself a ‘salary’ from your savings for potentially 20-30 years is incredibly complex.  

To enjoy a comfortable, stress-free retirement, you need an adequate income and a plan for how to achieve it. Whether you’re approaching retirement, or already retired, we have some tips that might help you sort out your strategy:

Firstly, you need to have a clear idea how much you expect to spend in retirement. This includes fixed expenses, such as rates, insurance, vehicle registration, and subscriptions; variable expenses like food, power, petrol, and transport; and discretionary spending, on things like travel, hobbies, clothing and entertainment. Some expenses (like your daily commute and store-bought lunches) might decrease in retirement, while others (such as leisure and healthcare) could increase.

The next step is to identify your potential income sources once you leave the workforce. There’s NZ Super, of course, if you’re eligible. Other income streams might include KiwiSaver, personal savings, investments, rental income, and/or part-time work.

Ideally, your retirement income should cover your expenses and leave some left over for unexpected costs. Unfortunately, it’s increasingly common for retirees’ expenses to exceed their income, resulting in a retirement income gap.

As well as NZ Super, there are several other valuable benefits retirees might be entitled to which could help reduce day-to-day living costs. These include the winter energy payment, paid automatically to those receiving the pension, and the Community Services Card, which reduces healthcare costs for low-income earners and those receiving certain government benefits (such as the accommodation or residential care supplements) - superannuitants included.

The SuperGold Card, which you should receive around the same time as your NZ Super payments start, provides a wealth of benefits and discounts, including for transport, groceries, entertainment, and health and wellbeing services. It’s worth asking if there’s a SuperGold discount whenever you go to pay for or book something. Every little bit helps.

When planning your retirement income, it’s essential to think long term – longer than you might expect. Actuaries who specialise in mortality risk suggest that people retiring these days should assume they’re going to live to between 90 to 95 years old. That means you’ll need an income that lasts up to 30 years.

If you retire mortgage free and have also managed to save a nest egg, you’re off to a great start. Now you need to calculate the amount of savings (plus any returns on those savings) you can withdraw each year that will be enough to support a comfortable lifestyle, but not so much that your coffers run dry while you’re still alive and kicking.

Renowned financial expert and academic William Sharpe calls this calculation “the nastiest, hardest problem in finance”, because no one knows for sure how long they’ll need their money to last. And if you have a partner, you’ll also want your retirement income plan to keep working if one of you passes away or suffers cognitive decline.

If that sounds like a lot of fuss, it sort of is. That’s why specialist decumulation funds exist – to do all the hard work for you and provide peace of mind that you’ll always have money coming in to cover your essentials and extras.

Lifetime Income, for instance, pays a reliable, consistent fortnightly income based on your starting retirement savings, age, gender, tax rate, lifestyle choices, mortality risk and inflation tolerance and it’s designed to last as long as you do.