A Massey University report reveals a widening gap between NZ Superannuation and the cost of living in retirement.
The New Zealand Retirement Expenditure Guidelines Annual Update 2023 examines various lifestyle choices and the savings that are required to fund the respective lifestyle. The study shows that your geographic location (metropolitan v provincial) and your personal circumstances (single v two-person household) are significant factors in determining your household costs. Either way, the study finds that NZ Superannuation is not sufficient meet the financial needs of the retired population.
Even the one-person, no-frills households in provincial areas (the lowest spending category) spends just over $193 a week more than they receive from the government.
This is based on the New Zealand Retirement Expenditure Guidelines as at 30th June 2023, for a provincial no-frills budget of $689.54 per week and NZ Super of $496.37:
At the other end of the scale, a two-person ‘choices’ household in a metro area spends $902 more each week than the NZ Super provided them.
The report is a reminder about the need to plan for your retirement, understand what savings you are likely to need at retirement, and to work towards accumulating those assets.
KiwiSaver is an important first step, but you are likely to need to do more than just contribute the minimum 3% required to maximise your government and employer contributions (which is the strategy of many KiwiSaver members). KiwiSaver has options to increase your contributions (4%, 6%, 8% and 10%) which is one avenue to close the gap, particularly when coupled with the right fund.
There are also other options, such as managed funds, residential property investment, or building your own portfolio of investments.
The report makes sober reading, but please don’t be put off. Take the first step in closing the gap and talk to a financial adviser.
A copy of the report is available on the Massey University website:
https://www.massey.ac.nz/documents/1554/new-zealand-retirement-expenditure-guidelines-2023.pdf