Mind the (Retirement Income) Gap
We all know that NZ Superannuation (NZ Super) isn’t enough to live on. But just how big is the gap between your pension and your expenses in retirement?
Key Findings
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The retirement income gap between NZ Super and what retirees actually spend decreased for most household groups in 2024 compared to the previous year. The exception is two-person households living either a ‘choices’ lifestyle in the city or with ‘no frills’ in the provinces, both of which saw their income gaps grow larger.
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Despite income gaps shrinking for some households, all still reported a shortfall between their NZ Super payments and what they spent each week.
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The one-person, ‘no-frills’ homes in provincial areas (the lowest spenders of all) were spending over $44.78 a week more than they received from the government.
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At the other end of the scale, a two-person ‘choices’ home in a metro area spent $940.67 more each week than their NZ Super income.
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The estimated lump sum needed to fund these gaps ranges from $48,000 for a one-person provincial household on a no-frills budget to $1,142,000 for a two-person household living with choices in a main city (based on life expectancy of 90 years).
Retirement Expenditure Guidelines Report (2024)
What is the report?
Every year, Massey University’s Financial Education Centre releases a report showing the typical expenditure for retirees and the income required to cover those expenses. The report is based on data collected by Statistics New Zealand as part of its Household Expenditure Survey (HES). Massey’s 2024 Retirement Expenditure Guidelines are based on data from the 2022/23 HES, which captures expenditure patterns of retired households in New Zealand, with adjustments for inflation to reflect costs as of June 2024. You can read the full report here.
The report considers single-person and two-person households separately, as well as two geographical areas: Metro, which includes our main cities of Auckland, Wellington and Christchurch, and Provincial, which covers the rest of New Zealand. It also distinguishes between a ‘No Frills’ lifestyle which reflects a basic standard of living and a more comfortable retirement with ‘Choices’, which includes some luxuries or treats, such as meals out and a larger budget for food like fresh fruit and meat.
What did the report find?
For all categories, the data shows that the average retired household spends more than their income from NZ Super. Their key costs included housing and household utilities, transport, and insurance. No surprises there.
More encouragingly, the retirement income gap between NZ Super and what retirees actually spend shrank for most households in 2024 compared to the year before, (the exception was two-person households living either with choices in a metro area or no frills in a province).
The smallest income gap was $44.78 a week for a one-person provincial household on a no-frills budget, increasing to a gap of $940.67 a week for a two-person household living with choices in a main city. The estimated lump sum needed to fund these gaps ranges from $48,000 to $1,142,000 respectively (based on a life expectancy of 90 years).
Curious about the income gap you might face based on your circumstances? Check out the table below for insights.
The Difference Between Total Expenditure and NZ Super
Two-person household's weekly expenditure
| Choices Lifestyle | Metro Area | Provincial Area |
| Household Expenses | $1,739.85 | $1,210.18 |
| NZ Super Payment | $799.18 | $799.18 |
| Income Gap | $940.67 | $411.00 |
| No-frills Lifestyle | Metro Area | Provincial Area |
| Household Expenses | $909.90 | $1031.85 |
| NZ Super Payment | $799.18 | $799.18 |
| Income Gap | $110.72 | $232.67 |
One-person household's weekly expenditure
| Choices Lifestyle | Metro Area | Provincial Area |
| Household Expenses | $768.76 | $752.41 |
| NZ Super Payment | $519.47 | $519.47 |
| Income Gap | $249.29 | $232.94 |
| No-frills Lifestyle | Metro Area | Provincial Area |
| Household Expenses | $687.84 | $564.25 |
| NZ Super Payment | $519.47 | $519.47 |
| Income Gap | $168.37 | $44.78 |
Managing the Retirement Income Gap
What is a retirement income gap?
A retirement income gap occurs when the money you receive from your pension (New Zealand Super), isn't enough to cover all your living expenses once you've stopped working.
A pressing concern for retirees
As retirement approaches, many New Zealanders find themselves confronted with a pressing concern: Will their pension be enough to sustain their desired lifestyle?
As outlined in the table above, it's common for New Zealanders to discover that their NZ Super payment is not enough to cover all their expenses in retirement. To address this, some may choose to work longer to save more before they retire, or adjust their plans to ensure that their savings can support their expenses in retirement. If you're thinking about continuing to work past retirement age, take a look at this article here. It provides detailed information about your rights to work after turning 65.
Options to bridge the Retirement Income Gap
Most people will bridge the gap with retirement savings that they’ve accumulated during their working lives. However, if this isn’t enough to support your ideal retirement, there are other options.
If you don’t believe you have enough put aside for retirement, you could consider:
- Working for longer. Increasing numbers of Kiwis aged 65 and over continue to work either full time or part time. Working not only allows you to add to your savings, it also means you’ll be retired for a shorter period, so you’ll need a lower lump sum when you do stop working.
- Scaling back your retirement. You can take a scalpel to your budget and opt for a “no-frills” lifestyle.
- Downsizing. You can move either to a less expensive house in the same area, or to a cheaper region where weekly costs are lower (from a city to a province, for instance) – or both. This should free up money from your house, which you can add to your retirement nest egg.
- Home equity release. If you’d prefer to stay put, you could look into home equity release solutions, like a reverse mortgage or Lifetime Home, our debt-free alternative. These allow you to access some of the wealth tied up in your home without having to leave it.
If you’d like to find out more about how Lifetime Home could help you bridge your retirement income gap, simply click here to request an information pack.
Bridging the income gap with Lifetime Retirement Income
If you have a lump sum saved for retirement, it's essential to manage it wisely. You should be drawing down from your investments regularly and at the right rate to bridge your income gap, ensuring you have enough to live on without running out of money too soon.
That’s where Lifetime Retirement Income can help. As retirement income specialists, our sole purpose is to give you the peace of mind to spend confidently in retirement.
Lifetime helps you turn a lump sum (retirement savings) into a regular, tax-paid, fortnightly income designed to last - so you can enjoy the retirement lifestyle you deserve.
- Lifetime helps you take care of the income part of your retirement plan.
- Lifetime actively manages the key unknowns: your life expectancy and investment returns.
- Lifetime's investment strategy is focused on supporting you to a target age, not on gaining high returns in any one year.
- Lifetime works to preserve your long-term capital to support your ongoing retirement income payments for the long-term.
- Lifetime is backed by a dedicated team of industry experts
"Our purpose is to help people enjoy their retirement with the security of an income for life"