Kiwis in their 30s are set to run out of KiwiSaver cash less than four years after retiring, new analysis shows.
The analysis, commissioned by digital KiwiSaver advice platform BetterSaver, looked at the retirement prospects of Kiwis in balanced funds earning the average wage, with average household expenditure for where they live, as well as the national average current KiwiSaver balance of around $26,000.
Their data showed that, taking inflation into account, a 35-year-old New Zealander earning the national average wage could have enough retirement savings to last them just three years and seven months after they leave the workforce for good.
This means that at 65 years old - the age superannuation payments start and when many New Zealanders begin to retire - the KiwiSaver member would have around $468,000, which is equivalent to approximately $264,000 today, BetterSaver said.
BetterSaver founder and chief executive Joe Taylor urged Kiwis to consider escalating living costs when planning their retirement.
"The value of a dollar is plummeting. Even in years with more stable inflation rates, a conservative or balanced KiwiSaver fund can barely keep pace with inflation over the long term," he said.
"A few hundred thousand dollars might seem like a lot today, but it won't be nearly enough to retire with in a few decades."
Aucklanders could fare slightly worse come retirement. BetterSaver found that those living in the city could have enough retirement savings to last just three years and five months due to high living costs. They could have about $511,000 in their KiwiSaver, equivalent to about $288,000 in 2022.
BetterSaver's data also revealed:
- A 35-year-old Cantabrian earning the average regional wage could expect to have slightly less - about $443,000 (equivalent to around $249,000 in 2022) - at retirement, but due to lower living costs than other major centres, could fare similarly, with three years and five months' worth of retirement savings
- A 35-year-old earning the average regional wage in Wellington could fare slightly better, with three years and 10 months' worth of retirement savings, or around $555,000 (equivalent to just shy of $313,000 in 2022).
Taylor said that since homeownership remains out of touch for many New Zealanders, it's important to take KiwiSaver fund choice seriously.
"The brutal reality is that conservative and balanced funds over the long term are not going to give you a comfortable retirement. Many Kiwis' retirements will be fraught with hardship - and possibly even homelessness. It's terrifying, but it's also avoidable."
And with living costs rapidly rising off the back of the highest inflation rate in a decade, he said many New Zealanders are left without any extra cash to set aside for their retirement. This means being in the right KiwiSaver fund is critical.
"Obviously, increasing your KiwiSaver contribution rate is helpful, but with inflation as steep as it is, many people aren't in a position to. The single most important thing you can do is get in the right fund for you. It could mean tens - if not hundreds - of thousands of extra dollars in your hand at 65."
But alarmingly, BetterSaver's analysis used an inflation rate of 2 percent per year - the midpoint in the Reserve Bank's 1 to 3 percent midterm target. Inflation spikes like this year's 6.9 percent figure could leave Kiwis with even less of a retirement cushion than BetterSaver projects.
"Conservative or balanced funds just aren't likely to perform well enough to help Kiwis' retirement savings keep up with living costs," Taylor said.
"I would urge all Kiwis who have decades until retirement to find the right fund for their situation with the help of a financial adviser, or risk a harrowing retirement."
BetterSaver has an online tool that helps estimate how long someone's KiwiSaver balance could last.