It’s a new year and, as is customary at this time of year, many of us are working on New Year’s resolutions and goals for the year ahead. Be it a new car, owning a home, adding to the family or remodeling the kitchen.
On many Kiwis’ lists is retirement planning but what this means and looks like is different for different people.
For some, retirement means it’s finally time to travel and explore For others, it means more time to spend with family or the start of a new project or hobby.
Whatever your reasons, it’s a major life transition and even if retirement seems a long time away, it is always best to have a solid plan - the sooner the better.
If retirement planning is on your priority list this new year here are some of the most important things to think about:
Setting Goals
It all starts with setting goals. Long-term goals define how much you want to have saved or invested by the time you retire. These may change over time depending on the lifestyle you are aiming for but setting them in the first place is an important step!
How much do you need to retire comfortably?
Retirement looks different for everyone so how much is ‘enough’ will vary. To figure this out, there are a handful of factors to take into consideration. Important to note is that there isn’t a set ‘retirement age’ in NZ so the NZ Super is paid out starting at age 65 but this doesn’t mean you have to stop working then.
A lot of people work beyond this mainly because the current NZ Super rates ($22,721 a year after tax if you’re single and living alone or $34,955 a year for qualifying couples) may not be enough. The New Zealand Retirement Expenditure Guidelines show that these rates have been found unable to cover all the expenses Kiwis face at retirement, with a continuously widening gap.
This means it’s critical that you start planning for your future sooner rather than later.
What is your debt situation?
Another important factor to consider when deciding on a suitable amount to retire with, is any debt you will still be paying off in retirement. Will your mortgage payments be completed by then? Will you still have young kids in school? Are their university fees to fund? Do you have personal loans or credit card debt? These additional expenses will influence how much you need to squirrel away.
When should you start?
While it is never too late to start saving for retirement, it is also true that the sooner you start, the better. An early start means you’re able to save more and benefit from compound interest. Slow and steady with small, manageable amounts is often much more achievable than trying to save large chunks of money at a time. And, as you get more into the habit of saving regularly, you can increase your contributions gradually.
How will you fund your retirement?
You gain access to your NZ Super and your KiwiSaver balances at 65 but as we’ve mentioned, this may not be enough for the retirement you envisage or to help your dependents.
Putting money aside to build wealth is key but there are ways to do this which are more lucrative than others.
This is where a financial adviser is worth their weight in gold. It’s our job to help you invest your money in a way that will see it grow over time and get you ‘the most bang for your buck’. If you’re relying on term deposits or savings accounts, make sure you talk to us as there are much more effective ways to grow your nest egg.
The Bottom Line
With clear goals, good research, professional advice and a solid plan, it is absolutely possible to retire comfortably and live a great life as a retiree.
We love helping people make this happen so make it your resolution to get in touch today!