Retirement: How much will I need?
How much do I need to save for my retirement? It's a big question and it can seem daunting or scary.
When people hear figures like $1 million (as suggested in Australian media reports last year) they might think it is hopeless and switch off, rather than starting a savings plan.
There is no one answer to the question of how much we need to save for our retirement. It all depends on what sort of retirement lifestyle we hope to have and how long we might live.
On average a 65-year-old woman can expect to live to 88. A 65-year-old man can expect to live to 86. But life expectancies are lengthening. A 20-year-old today could expect to live 30 years beyond the retirement age of 65.
The Commssion for Financial Capability says it is important that people give their own retirement some thought and put some sort of savings plan in place.
Its website Sorted.org.nz has a useful Retirement planner that allows you to calculate some potential numbers.
Here are a few things to think about.
Take a look at what you are spending each year. The multiply that by 20, 25 or 30 times. That will give you a lump sum you need to aim for.
But remember that you will receive a pension from the Government. A single person receives around $19,000 a year, while a couple receive around $30,000.
Some of your expenses will have changed. You might aim to be mortgage-free by the time you retire. If you have children you will probably also expect they will have left home by the time you retire, or at least be helping with the household expenses.
Massey University crunched some numbers last year, based on figures from Statistics New Zealand's Household Economic Survey. It looked at single people and couples.
Based on those numbers and updated for 2016, here are some examples to think about:
If they live a 'no-frills' lifestyle they would need to save a lump sum of $136,513 to cover them for 25 years in retirement. That is because even after New Zealand Super payments of $384.76 per week, they would still have a shortfall of $105 per week.
If they want some 'choices' (a restaurant meal or a movie night) they would need to save a lump sum of $480,051 for 25 years in retirement. So they would need to come up with an extra $369.27 per week on top of the NZ Super payments.
If a couple living in a city wanted a 'no-frills' lifestyle they could get by on New Zealand Super. That is because they would expect to spend around $522.93 per week, which should be covered by the NZ Super payments of $591.94 per week.
But that is a basic lifestyle. That would not include treats and nights out.
If they want some 'choices' they would expect to spend $1091.77 each week. That would see them having to come up with an extra $499.83 per week on top of the NZ Super payments.
Over 25 years the couple would need a lump sum of $649,779 to cover their extras.
Massey University also looked at single people and couples living outside of the cities in its survey last year. They too would need something extra on top of the NZ Super payments.
The report found a single person in a provincial area would need an extra $44 a week for a 'no-frills' retirement and an extra $407 per week to have some 'choices.'
A two-person household would need an extra $101 per week for a 'no-frills' lifestyle and an extra $436 per week to have 'choices'.
When Massey University talks about 'choices', it is not talking about being extravagant.
Massey University's Doctor Claire Matthews said: "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 cuts of meat, doing some travel, or going to the movies or theatre."
These are just some examples to get you thinking and to motivate you to put a plan in place.
The Commission for Financial Capability says the important point is that you should put a plan in place. Every cent and every day you save helps.