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Massey University’s Financial Education and Research Centre has found that a ‘no-frills’ retirement will cost retirees less than $500,000 — but a retirement with frills attached has a price tag closer to the $1 million mark.
The Centre has this week released its latest New Zealand Retirement Expenditure Guidelines report, the thirteenth edition in the series which began in 2012.
The reports include findings around the current costs of retirement for retirees for each June-year, with the 2024 report using data from Statistics NZ’s triennial 2022/2023 Household Economic Survey.
The reports paint a financial picture for pre-retirees of what to expect in actual retirement expenditure in a range of different situations.
The latest report revealed that retirees were still spending at levels that exceeded NZ Super during the 12 months to June 2024 and insurance, housing, household utilities, transport and insurance were the primary drivers of rising costs.
In the June-2024 year, insurance costs were up 14%, household utilities and housing costs were up 4.4% and transport costs were up 3.5% for retirees.
These rising costs mean many retirees are in a position of not being able to get by on NZ Super alone and are having to supplement their superannuation with additional income or savings.
“Many New Zealanders hope for a higher standard of living in retirement than what NZ Super alone can provide,” report author Associate Professor Claire Matthews said.
“As a result, it’s crucial to recognise that the landscape of retirement planning is always changing. Regularly reassessing your retirement plans to account for external factors is essential.”
The latest findings mean people need to think about having additional income beyond superannuation in order to secure financial stability in retirement.
The Centre’s report found that many retirees are worried that they don’t have sufficient funds for retirement and struggle with the ‘fear of running out’ (FORO).
Do you want frills with that?
The Financial Education and Research Centre categorises retirement expenditure into two levels.
The first level is a ‘no frills’ one, and represents a basic standard of living that has minimal luxuries while the second retirement expenditure level includes more ‘choices’ and represents a more comfortable lifestyle.
These ‘no frills’ and ‘choices’ levels are impacted differently depending on if retirees are living in metropolitan and provincial areas.
The Centre found in the year ending June 2024, the total weekly expenditure of a two-person ‘no frills’ household in a metropolitan area to be $909.90 compared to a weekly $1,031.85 in a provincial area for a similar household.
Households that want a ‘choices’ lifestyle in a metropolitan setting can expect to spend $1,739.85 per week compared to $1,210.18 per week for those in provincial areas.
The report noted that all of these figures “significantly exceed” weekly NZ Super payments which range depending on your tax rate and relationship status.
The Centre said the projected lump sum required to support a two-person ‘no frills’ household in a metropolitan area is now estimated at $120,000, while a similar provincial household would need $252,000 on top of NZ Super.
The required savings increase even higher for people wanting a ‘choices’ lifestyle, with the report finding that metropolitan households will need a lump sum of $1,142,000, and provincial households will need $446,000 on top of NZ Super.
Retirement Commissioner Jane Wrightson said in September last year that New Zealanders need “definitely six figures” in the bank to get them through retirement and seven figures if they want to have a “very comfortable” lifestyle in retirement.
69 Comments
No mention of whether they own their own house or not, which must be a huge factor.
no no no...you can reverse equity mortgage. Don't expect keep the home. You will leave with what you arrived with - if you're lucky in diapers.
I note Stats did not release ownership by age in their overview of the 2023 census housing data. The information, however, is available via their data explorer:
~60% of 65+ own or partly own their housing.
~50-60% of 50-64 own or partly own their housing(% increasing with age).
No 5-year cohort under 50 breaks 50% own or partly own their housing, dropping quickly to below 30% for under-35 year olds.
Compare that to 2013, when 50% was achieved at 40. A whole decade of the population have gone nowhere, for the decade. In 2013, 167k 40-44yo owned or partly owned - in 2023, 163k 50-54yo owned or partly owned.
This has been a decade of epic housing policy failure for society.
But what about the 20yr old McDs worker FHB I read about.
Who had a dad that was franchise manager?
Free food, clothes, services and rent living at home, too?
McD's isn't real food XD
Sure, but we've been able to enrich older owners beyond their own productive means by foisting ever greater costs on the following generations!
Lol, I literally read this article only to see if they would specify or not about house ownership, as these retirement articles rarely do, which makes them utterly ridiculous and gets on my goat enormously.. And sure enough, zero mention. I was excited about pointing this out in a comment, but you are way ahead of me Jimbo...in timezone anyway...:)
Not quite true. On page 9 of the report, between 15% and 34% is allocated as housing expenses. The percentage varies and is specified according to single/couple, basic/choice and metropolitan/suburbban areas.
What a load of bollocks this is. Anyone who wants to have any decent standard of living when they retire will need considerably more than $500k. I'd suggest $2m is required if you retire at 65, live for another 20-30yrs and want to actually do stuff with the best possible healthcare etc. Heck, I questioned retiring at 45 with over $10m and whether that would get me through to 100. Yes, I know I sound like a dick with my last sentence, but I'm constantly amazed at how little buffer are put into these models for market corrections, black swan events, house needs a new roof, need a new car etc. All it takes is a for a decent market correction and you can easily lose half your wealth in a few months.
Really, I was going to say the opposite. Once you get to 75 you probably don't need much, NZ super should pretty much cover you. Between 65-75 maybe a $500 a week top up, which is $250k. Assuming you own your own house that is.
For many people the $250k can be obtained simply through downsizing. And many (most?) people can work past 65 too.
How can a shop keeper, teacher, police person etc. save anywhere near $2m?
By moving to Australia 😁
Australia super is so good that even on the minimum wage all your working life and just relying on your employer to put in 11.5% (12% from July 2025) and you'd end up with over $500k. NZers don't realise how good that is and how lame Kiwisaver is
Taxed on the way in and taxed on the way out. Very little incentive to contribute to it other than the minimum to get the $500 top up.
No @EpsomArtsand Crafts, NZ Super has a significant advantage because it's universal (NOT means-tested). NZ Super+ NZ KiwiSaver are a better deal than Aus Age Pension+ Aus Superannuation in my opinion. In Aus your Age Pension (their equivalent of our Super) is means-tested, so anyone with savings or investments will get penalised more by receiving less than they would in NZ. I would rather have the NZ system which allows me to have more savings and investments at retirement, rather than totally rely on government and end up receiving less in retirement.
Let alone 10 million!
By investing in Real Estate ?
I earnt a similar amount to a teacher in my 30s, a headmaster in my 40’s and a bit more in my 50’s.
How to get $2M in savings? Easy. Start in your 20s, get a 2nd job. Don’t spend, live like a pauper and invest in a wide range of ETFs.
Im arrogant, conceited and was laughed at by work colleagues. Never felt I missed out on a thing. Retired last year at 58.
If you lived like a pauper until you were 58 then I'd guess you missed out on a lot!
Life is for living and doing a lot of that living while you are still young is very important. That doesn't mean you should be frivolous but travelling in my late teens and 20s was a massive life experience and I don't regret it one bit. Now I'm older, it's just not the same.
What are you going to be doing in your late 60's and into your 70's that requires so much cash?
From my observations:
- Shopping at boujey supermarkets buying boutique products
- Buying e-bikes
- International holidays
- New cars
- Buying all sorts of trendy products your peers are getting
- Helping the kids with the grandkids in some financial form
Counting it of course Hamish
Going overseas each year in the NZ winter. Budget on a month in Europe, Spain, Portugal, France etc. $30k for a couple.
Literally earning $700k pretax @ 7%. And that is without touching the capital.
Who is burning through $700k PER YEAR for 50 years?
Never mind the bollocks mate! My partner and I retired to a 2 bed (with carpark) Rymans Retirement Village in Auckland in 2021. We bought for $827K and pay $129 pw fixed for life which takes care of general and water rates and all exterior maintenance plus interior maintenance to fixed chatels. We have approx 600K in savings and get Super. We enjoy a cruisey lifestyle with lots of overseas trips.
Of course it all depends on indvidual lifestyle, but as a general rule I don't think you need as much as you think.
Good Luck
or double dip for as long as you can. Every year post 65 would make a considerable difference.
Its about quality of life, if your used to international holidays, you may want to keep travelling well into 70/80's
Your health matters a lot.
It would be easier if we all just put aside 10% from age 18...
Going to have to budget more for heatlhcare with the way the politicians are undermining public healthcare.
Whatever you do don't buy a rental property - that is terrible idea
Even the $500k figure is laughable. Reality most people are going to have to survive on a lot less going forward. Don't really see a problem with this , my own parents have saved money on the super the last ten years. They own a vehicle and travel the country flying and driving. ( Only one of them now). Spent around 20hrs per week doing volunteer work.
Personally not even going to be close to that figure, so I guess it's no frills at all for us. Really though the frills just sound like greed.
I can't see how you can have a decent retirement with $500 k
Really depends upon lifestyle imho. Your version of decent is likely to be significantly different to another persons.
Assuming you’re mortgage free I think $500k would be enough to live an ok lifestyle ie enough for a coffee each day and pay your rates, bills etc. Perhaps 2 or 3 overseas holidays if that is your thing to tick off the bucket list destinations but obviously not every year and eating out only very rarely - but if an annual overseas holiday is your version of decent and regularly eating out, then yes $500k probably isn’t enough.
Many peeps will continue to work a few days til 75ish I reckon. I can't see myself stopping work completely .. if u enjoy what you do why stop? Retireees can pay for holidays and whatnot by working a little bit - to top up their pension.
I have been part time since about 40 and find it a great life. Imho it's a better life solution to work hard and save hard early, then to go part time from say 35 to 70... than working full time from 20 to 65 and then fully retire. You are then too old at 65 to do much of the active stuff... and miss out on time with your young family too.
For many of us there is also the ability to earn in retirement by renting out our own (mortgage free) homes whilst traveling in nz, renting rooms.. and so on.
I think a create approach is the better way than just trying to save a number. Life's too short.
I'm not so sure the way rates and insurance are going, they will only continue to increase, as will the cost of electricity for years to come, and when you add maintenance on the home over the space of 10-20 years (roof, paint work, having to pay people eventually to do all this for you as you lose mobility), and then inflation, it adds up quick.
Depends what you're into Yvil. I have retired (Late 50's) couple across the road from the bach and they have a really rewarding life. $500k would be an annuity of around $30k pa, plus savings, plus Super when that kicks in. Their garden is incredible, always exercising, contribute and participate in various community initiatives, hike and e-bike a lot. They are always happy, fall asleep and wake up to bell birds and Tui and the sound of waves.
What else do you want to do, travel aside? They catch a fish, sit on their deck and watch the sunset in the evening with a glass of wine
Sounds ok to me.
Southern Cross Med Insurance for my parents, 85yrs is $1400/month. It’s sucking up their final funds. They’ve had it all back in procedures and I pity anyone going public with stage I bladder cancer, removal of skin lesions, cataract operation and echos. I think private med insurance is mandatory and more so going forward. This alone adds several hundred thousand to the amount needed to retire.
My parents lost some money in their mid 50s, so worked until 70, retired with aroun $250k in nominal terms. 83 now, have had 3 overseas holidays (Europe, China and cook islands). Still have $125 left. They go for drinks and food 2x a week.
As this is a financial website, has anyone here thought of stacking some Bitcoin away or trading some crypto etc ? to help them along in retirement.
This is an anti BTC and crypto site..any comments to the contrary will be admonished even if the evidence published daily is ignored.
So true Baywatch ...a vast majority on here are so "risk averse" to anything that's new and world changing they just bury their heads on the sand...it will catch up with them and it will be too late, as by then Blackrock et al will be taking their "cut"!
Absolutely yes. By 2033 I'm 100% confident the value of the median NZ house will have dropped to below 1BTC.
I think having a non-means-tested NZ Super helps a lot as it substantially reduces the amount of savings required for retirement. I just hope that it's still going to be available by the time the youngest of the people reading this will retire.
The issue is how can we afford to keep it non-means tested? Where does this money come from? Is it best for the country to keep going on current settings? Given it relies on an ever increasing population, therefore increasing immigration exponentially given the lowering birth rates in NZ I would argue not. It requires more and more people which needs more and more housing, infrastructure, electricity, fuel, a.k.a resources. This doesn't seem sustainable and it is already having impacts such as the rise in illegal workers, exploitation of workers, culture clashes from such large leaps in cultural diversity taking time to adapt and accommodate (sad this).
I realise that it might be a challenge to retain the 'non-means testing', that's why I wrote that I 'hope it's still there' in the future.
I don't mind immigration, it should just be in moderation. Moderate immigration is a good thing for the country, and for the retirees.
Could just reinstate the surcharge on income over the pension that the boomers took off themselves in 1998/9.
The Centre has this week released its latest New Zealand Retirement Expenditure Guidelines report, the thirteenth edition in the series which began in 2012.
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Thanks
From someone who has been retired for 12 years ( retired at 56 ) if you want to have awesome retirement the you need as much as possible.
To have a nice property theres $5 mil, $10 mil investments, $1 mil in toys, overseas travel every winter, new cars every 4 years you need alot of Capital and cashflow.
I say $5mil min, $500k would allow to update your Corolla every 10 years and a few trips to Aussy with the Grandies.
Some people live happily on the pension in their own homes but when you don't work anymore you have the time to really have fun, make sure you have the finances to max this time, it does not last for ever !
What percentage of households would have $5mil on top of a mortgage free home do you reckon? One percent?
I believe that 5 mil would include the home for sure.
2-3 mil would buy you a decent house in the most popular parts of NZ (and all the furniture, toys, car, etc), another 2 mil in investments might return you a passive income of 100k gross (77k-ish after tax). Non-means tested Super of 40-50k (for a couple) would bring your annual passive income to (roughly) 120k-ish p/a.
How many 'couples who retire with a property that's worth 2-3 mil and have 120k passive income are there in NZ? I would expect more than 1%. That's not to say that each of these couples has around 5 mil in net worth, of course. But still, 5 mil actually doesn't seem that outrageous, especially if the couple wants to retire early (before their super kicks in).
Copilot says: However, it's safe to say that this group represents a very small fraction of the overall population, likely less than 1%.
Take note though, I am talking about couples net worth at retirement, not individuals net worth at retirement. For each individual in that couple it could be 2.5 mil net worth.
Hmmmm , $ 500 000 into some steady NZX stocks paying a fully inputed dividend ... 4 % net , say ... an extra $ 20 000 per annum , atop the pension ... that $ 20000 pays all rates / insurance / car costs / SKY / .... seems feasible ...
Interesting advice, thanks.
That’s my plan and on track…..
But:
Suggest don’t plan to stick only to NZ sharemarkets - consider overseas based ETFs.
Also doesn’t need to be dividends - capital appreciation and sell a few each year tax free should also be considered.
Oh and set up a simple home gym and get in the habit of using it….
... a simple bar to hang from , or do pull ups ... does wonders for the shoulder muscles & for realigning the spine ...
If you save for nothing else - save enough for private health insurance post retirement- I’ve lost count of how many people I know who’d be dead without it. The rest of their retirement savings would have been pointless without it.
OR just exercise daily .
Some have the unlucky genetic lottery, or simply develop illness they have no control over out of the blue. Stroke, dementia (on the rise), you name it. Sometimes bad things happen to good people, and exercise helps, but isn't any guarantee.
Ha! We've been in Southern Cross Healthcare since our mid-30s as we thought it would be better to be in when we got to old age. What they don't tell you is that once you turn 65 the premium go up every year, a helluva lot! We're nearly 78 now and have just cancelled it as it's nearly $12,000 a year for both of us! It has been useful for husband's prostate and eye problems in the past but I've been lucky with only a hysterectomy at 42 on my record. Dementia and heart attacks wouldn't be covered anyway, so happy to go now if we reach 80.
All risk based sadly.......
We all kind of hope we are good enough in old age unless it's a major and the taxpayer kicks in.....
Also feel maybe you don't want too much messing with the minor things then in any event - quite a shock to the system.
Have you by chance tallied up the premiums you paid and then compared that total with the costs carried by Southern Cross? I'd be interested in the result.
For those of us confident in winning the genetic lottery, self insuring by putting the equivalent of the premiums into an investment fund is an alternative to health insurance. There is a risk of course that the fund might not cover costs but it's probably better odds than winning Lotto or spending at the TAB.
bookworm69,
Did you consider having an excess? I took a $2000 excess several years ago and that cut my premium almost in half. Since then, I have been diagnosed with cancer and had a hip replacement. I am almost 80. Last year, Southern Cross paid out over $115,000 for treatment. My premium is still under $4000pa.
save enough for private health insurance post retirement- I’ve lost count of how many people I know who’d be dead without it.
Can you expand on what you mean by dead without it? I'm guessing because it takes too long to be seen in the public system?
Only half a million. Easy.
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