For anyone planning their retirement in one of New Zealand's big cities and wanting a few extra treats, you better start saving as a new report shows the cost of living crisis is hitting hard.
The latest Massey University NZ Fin-Ed Centre New Zealand Retirement Expenditure Guidelines released on Wednesday estimates how much you'll need to get by in your golden years.
The report found whether people were planning a "no-frills" or "choices" lifestyle, they're now spending more than they would receive from the pension.
It also found a couple living a "no frills" lifestyle in an urban setting will need $235,000 and a rural couple will need $120,000.
A couple in the urban area with a "choices" lifestyle would require a lump sum of $831,000, while the same couple in the rural area would need $539,000, according to the report. A $415,000 shortfall would require a saving of $529 a week from the age of 50. That means, regardless of where you live, you'll have to save more from the age of 50.
"No frills means, yes, you can cover all your costs and you're not going to be stuck at home doing absolutely nothing, but you're going to be quite limited. You're not going to have choices when you go to the supermarket. You're going to be looking at the basic products, no-brand name products, the cheaper cuts of meat etc.," Massey University Associate professor and report author Claire Matthews explained.
"With choices, you can afford some luxuries. You could go out for meals more frequently. You can do things to enjoy yourself. You're going to be able to do more travelling, so you've got more options available in terms of how you spend your retirement."
A one-person household in an urban area living a "no-frills" lifestyle would spend $363.32 more than they would receive from the pension. The same person in the provincial area would be short by $226.60. A one-person household in an urban area living a lifestyle with "choices" would spend $700.15 more. The same person in the provincial area would be short by $800.41
For a couple in an urban area living a "no-frills" lifestyle, they would spend $269.80 more than they would receive from the pension while the same couple in the provincial area would be short by $137.60.
A couple in an urban area living a lifestyle with "choices" would spend $953.63 more than they would receive from the pension. The same couple in the provincial area would be short by $618.08.
Matthews told AM all households across New Zealand are feeling the pinch.
Matthews said people in provincial areas are getting hit the hardest, with their costs increasing above the rate of inflation. But all other households are below the rate of inflation.
She told AM while the savings needed might seem large, most people have KiwiSaver, so they'll be well on their way already.
"It all comes down to what sort of a lifestyle you want when you hit retirement but basically what it's saying is in order to achieve the sort of lifestyle that our current retirees are having, there is a need to save reasonably large sums of money if you haven't started saving already," she said.
"We need to remember a very large portion of our working-age population are members of KiwiSaver and therefore will already have some savings. I think the average is around $70,000. So that is obviously quite a wide range around that, but it's around $70,000 per member.
"If you've got two people that have been in KiwiSaver since the beginning, they might already be well and truly there and be well on their way to actually managing to hit the choices lifestyle amount."
She told AM the report is primarily based on homeowners and it assumes you're in retirement from age 65 to 90.
Watch the full interview with Claire Matthews in the video above.
