Low interest rates mean retirees may need to seek out other savings options, though they also bring the significant advantage of being able to pay off a mortgage quicker, according to the latest Retirement Expenditure Guidelines released by the Westpac Massey Fin-Ed Centre.
The 2019 report showed that a two-person household in the city would need to have approximately $787,000 in the bank to fund a ‘choices’ lifestyle – a more fulfilling retirement life which includes some luxuries. A couple living in the regions would need to have saved around $493,000.
A ‘no frills’ lifestyle would cost around $261,000 for a couple living in the city, and only two-person provincial households came close to being funded by New Zealand Superannuation.
The report confirmed that most retirees do supplement their Superannuation payments with other savings or income, and said the current low-interest environment would be “challenging” for retirees. Report author Dr Claire Matthews of Massey Business School noted that “careful consideration” would be needed to ensure retirement savings generate an income capable of supporting a retiree’s intended lifestyle, and doing this without taking on a higher than appropriate level of risk.
"While the lump sum required to fund the difference in spending over New Zealand Superannuation can seem daunting, it can be reduced by continuing to work either full or part-time, or by delaying retirement for a couple of years," Dr Matthews said.
"If you delayed your retirement for two years, continued working and saved all your NZ Superannuation payments, it would make a significant impact to your retirement nest egg.”
Westpac NZ general manager of consumer banking and wealth Simon Power says that although savers are currently facing lower returns, the ability to pay off a mortgage faster will give retires greater financial stability and peace of mind.
"It’s never too early or too late to start planning for retirement. Power said. “We encourage all New Zealanders to regularly consider their savings goals and think about how they’ll fund the retirement they want."