Running out of money midway through our golden years is a concern for many of us. Recent studies show that many retirees risk outliving their savings by nearly ten years. To prevent this, it's crucial to address longevity risk, or the possibility of outliving your financial resources. Below are some tailored retirement strategies to help ensure your retirement savings last.
To build a sustainable retirement plan, it’s essential to understand where your income will come from and how much you’ll likely need to cover your expenses. This means identifying all income sources, while also anticipating your regular spending needs and potential unforeseen costs.
Having a clear picture of both ensures you can plan for the long term and make adjustments if needed to maintain financial security throughout retirement.
Consider these common income sources in New Zealand:
Superannuation: New Zealand’s government-provided pension is a reliable income stream for most retirees.
KiwiSaver and other savings: Your KiwiSaver account, along with other savings and investments, can supplement your New Zealand superannuation.
Investment income: Income from shares, bonds, and managed funds can provide additional financial support.
Rental properties: If you own rental properties, the ongoing rental income can significantly enhance your retirement budget.
Part-time work or consulting: Many New Zealanders choose to continue working part-time, which not only boosts income but can also keep you engaged and active.
Depending on your circumstances, you might also receive unexpected income from an inheritance or the sale of assets. However, it’s important not to rely on these uncertain sources as a primary financial strategy.
Key expenses in retirement typically include:
Housing: Even if you own your home, factor in maintenance, rates, and utility costs.
Healthcare: As you age, healthcare becomes more significant. Budget for medical, dental, and other health-related costs, including potential long-term care.
Insurance: Life, health, and home insurance premiums are ongoing and may increase with age.
Daily living costs: Cover essentials like groceries, clothing, and utilities.
Leisure and travel: If you’re planning to travel or pursue new hobbies, these costs should be part of your retirement plan.
Use these tools to gain a clearer understanding of your retirement needs:
NZ-specific retirement calculators: Online calculators tailored to New Zealand can help you estimate how long your savings will last, based on your lifestyle and projected expenses.
Budgeting tools: Apps and software can help track your spending and project future needs more accurately.
Professional financial advice: Engaging a financial advisor who understands the local market can help you develop a tailored retirement plan.
Once you have a clear picture of your income and expenses, it’s time to create a plan that ensures your savings last. Consider the following:
Life expectancy: Estimate how long your savings need to last based on your health and family history.
Planning horizon: Add an extra 5-10 years to your life expectancy to create a financial buffer.
Investment risk: Choose investments that align with your comfort level and financial goals.
Return expectations: Be realistic about potential returns and the impact of inflation on your purchasing power.
Tax implications: Understand how taxes on different income sources will affect your net income.
Asset allocation: Balance your portfolio with growth and defensive assets to manage risk.
Inflation protection: Plan for inflation to ensure your income retains its value over time.
Withdrawal strategy: A conservative withdrawal rate of 4-5% annually is generally recommended to preserve your capital.
Regular reviews: Regularly review your financial plan to adapt to changes in the market or your personal circumstances.
Retirement planning can be complex, but you don’t have to do it alone. Findex offers tailored financial advice to help you secure your retirement.
KiwiSaver and investment reviews: Optimise your KiwiSaver and other investments to ensure they align with your retirement goals.
Income planning: We help you compare and choose the best income options to sustain your retirement lifestyle.
Insurance assessments: We review your insurance needs as they evolve to ensure you’re adequately covered.
Retirement is your time to enjoy the rewards of your hard work. With careful planning and expert advice, you can ensure your savings last, and your lifestyle is secure. Contact Findex today to start planning for a fulfilling and financially secure retirement. Let’s work together to make your retirement dreams a reality.
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The views and opinions expressed in this article are those of the author/s and do not necessarily reflect the thoughts or position of Findex.
10 September 2024
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