Do you know how much money you will need for retirement?
Recent analysis by the Westpac Massey University Fin-Ed Centre, revealed that a couple wanting to live in a major city and have a comfortable retirement would need to save a lump sum of $785,000 at retirement - and have a mortgage free home.
This figure can certainly be intimidating if you have very little money saved. We are lucky to have NZ Superannuation when we turn 65, but this is only $411 per week. Do you think you can afford the retirement you are dreaming of for this figure?
It’s never too late to get started, even if you have had a sluggish start. The more you can save, the better lifestyle you’ll have. Here are 7 tips to help you make up for lost time.
1. Set a date and get started
Capitalise on what’s called the "fresh start effect," which suggests that its easiest to adopt to new habits and makes changes if you tie it to a memorable date. It could be a birthday, anniversary, or even the beginning of a new month or season.
Pick a date that is meaningful to you and write it down in your calendar. That’s when you wave goodbye to the retirement planning regrets of the past and set your sights on making serious progress going forward.
2. Take a closer look at your spending
As the old adage goes, it’s not about how much you earn but about how much you spend. You need to understand where your money is going and where can you make savings. There are banking apps available today that are great for tracking your spending. When you find some money you can put away, set up regular payments to your retirement fund.
3. Get rid of your debt
Did you know that over-65s in New Zealand owe an average of $232,000? Paying down your mortgage before you retire is a must if you want to enjoy a comfortable lifestyle. Always keep in mind that the longer you keep the mortgage, the more money you’ll be paying the bank on interests, so it makes sense to have a good plan for repaying it. There are ways to structure your mortgage that can help you get out of debt quicker.
If you have personal loans or credit card debt, address these asap. You can potentially put that debt towards your mortgage or re-finance to another credit card with 0% interest. If there’s one thing you should prioritise, it should be getting rid of your ‘dumb’ debt.
4. The power of KiwiSaver
We’ve said this time and time again, KiwiSaver is a great tool to build your nest egg. Firstly, make sure you join if you haven’t already done so. If nothing else, you’ll be getting an extra 3% from your employer and $521 from the Government, if you contribute enough.
Secondly, make sure you tick all the KiwiSaver boxes: check that you are in the right fund, that you are paying the right tax and that you are getting your $521 from the Government every year. Want to know more? We have some ideas.
5. Consider downsizing
Downsizing by moving to a smaller place would free up cash and create savings in terms of the house insurance, rates and maintenance costs. You can also look at downsizing your car or boat. It can be drastic move, but it pays to at least consider it if you think you are way behind on your retirement savings.
6. Generate extra income
You can get a side hustle, work extra hours, get a better paid job or rent a room in your place. Possibilities are endless, get creative. You might need to get out of your comfort zone, but it can make a significant difference to your nest egg.
7. Plan to work for longer
65 doesn’t need to be your retirement age. A lot of people are working longer these days, either because they need to or because they want to. There's also increasing evidence that the payoff of working past age 65 may go beyond having an income and delay using your savings. Some studies have linked working past retirement with better health and longevity.
Stop making excuses and get started
Take control of the retirement you want to have now. If you are not sure where to start and you need some guidance, we are here to help.