Retirees need more than the pension
<p>If you don't fancy the idea of budgeting and cost-cutting in your old age, you had better get saving.</p>
<p>That is the message from Massey University's latest Retirement Expenditure Guidelines, which show even people living a frugal lifestyle are spending more than they get from NZ Superannuation.</p>
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<p><strong>How are you planning for retirement?</strong></p>
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<p>The guidelines calculate what retirees spend on a "no frills" retirement, or a more fulfilling "choices" lifestyle, in New Zealand's metropolitan and provincial centres.</p>
<p>A one-person household in Auckland, Wellington or Christchurch is spending $489.77 a week for a relatively scanty existence. For a more-comfortable retirement, people are paying $754.03 a week in the main centres and $782.02 in provincial areas.</p>
<p>NZ Super is just $374.53 per week for a single person.</p>
<p>The report's author, Claire Matthews, said it was clear New Zealanders needed more than the pension to live on. She said that could come from drawing down savings, investment income, or from working full- or part-time past 65.</p>
<p>"When the guidelines talk about a 'choices' lifestyle, it's not about being extravagant. It just means not having to watch every cent and being able to enjoy some treats from time to time, things like going out for a meal, not buying the cheapest cut of meat, doing some travel, or going to the movies or theatre."</p>
<p>The "no frills" lifestyle has $77 a week to spend on food in the metropolitan centres, compared to $133.32 for a one-person household living a more comfortable "choices" existence.</p>
<p>Housing costs can make a big difference to comfort in retirement. The survey found "no frills" one-person households were spending $136 a week in metropolitan areas and $122 in provincial areas on things such as rent, mortgage, rates and household power.</p>
<p>That rose to $199.54 and $205.74 for "choices" households in metropolitan and provincial areas, respectively. </p>
<p>Matthews said it was hard to get a clear gauge for these expenses because they could vary a lot, but she said life was much easier for people with freehold homes.</p>
<p>"It's important to get to retirement without a mortgage because even though when you own a home it's not cost-free, there is maintenance and rates," she said.</p>
<p>"Having debt makes it significantly harder."</p>
<p><strong>How much do you need to save?</strong></p>
<p>To achieve what the guidelines show is a relatively conservative weekly income of $489.77 for a single person in retirement, retirees need a lump sum of $113,216, and NZ Super.</p>
<p>A 32-year-old with no savings would need to save $59 a week over the rest of their working life to achieve that amount.</p>
<p>The more comfortable lifestyle would require a lump sum of almost $400,000, or $207 a week in savings.</p>
<p>Saving that lump sum in KiwiSaver is a little less painful because employer and Government contributions will help.</p>
<p>"Hopefully people will realise this is not unachievable," Matthews said:</p>
<p>"Two years before you retire is a little late to be starting but if you still have 10 or 15 years, it is not too difficult to do with KiwiSaver because you have what you are putting in, what your employer is putting in, and the Government contribution. But the earlier you start saving, the better."</p>
<p>She said it was likely some people thought that just because they were members of KiwiSaver, their retirement planning was sorted.</p>
<p>But many might not be on track. A 32-year-old woman earning $52,000 a year, contributing 3 per cent to KiwiSaver and getting another 3 per cent from her employer and the full Member Tax Credit is on track to save $228,882 by the time she is 65. That is the equivalent of $607 a week until age 90 - better than no-frills but not as much as the choices life.</p>
<p>Many KiwiSaver members are contributing nothing to their accounts.</p>
<p>Matthews said there was also the problem that people would have to make their lump sums last, not blow them in one frenzy of spending.</p>
<p>"There is the 'Lotto effect' of getting a big lump sum," she said.</p>
<p>It was not a problem yet because balances had not reached the point where people were withdrawing significant amounts.</p>
<p>But once retirees were regularly withdrawing $200,000 at 65, she said it could feel like a lot of money all of a sudden.</p>
<p>"But when you have to make it last over 20 or 30 years of retirement, it is not that much."</p>
<p><span>Written by </span><span>Susan Edmunds</span><span>. First appeared on </span><span><a href="/Stuff.co.nz"><strong>Stuff.co.nz</strong></a>. </span></p>
