Retirement doesn’t have to mean the end of a productive, enjoyable lifestyle! With planning and saving for retirement, you can enjoy the years after your retirement in comfort and without financial concerns. For many, superannuation and retirement savings are things they would rather not think about, but wise financial planning and investment today can help make your retirement a rewarding time.

How much do I need to save for my retirement?
There is no single answer to this question. How much you need to save will depend on the quality of life you expect to have during the years of your retirement. You will receive New Zealand superannuation, but it’s worth saving some extra money to complement your NZ super payments and prepare yourself for unexpected expenses.

Generally, it’s considered you’ll need around 70% of the income you’ll be receiving just before you retire. If you’re a long way from retirement, calculate your required savings using 70% of your current pay. This amount should allow you to continue with a good lifestyle. Costs for health care may increase, but the amount you spend on mortgage payments, education and other expenses will decrease. Ask yourself:

• When do I want to retire? The amount you need to save will be dependent on the age at which you plan to retire. Assuming you retire at age 65, you will need to plan on saving enough income for 20 years.
• What kind of lifestyle do I want during retirement? Consider whether you are willing to live a simpler lifestyle or whether you want to maintain your current standard of living.
• Will I be single or living with a partner? There is no certainty in life, so ensure that there will be enough to meet the needs of both you and your partner during the years of retirement.
• Will I be renting a property or living in my own home? If you decide to rent, you will need more savings for rent payments, but you’ll have more cash readily available (this would otherwise be tied up in home ownership). Debt-free home ownership will provide more security, but remember to budget for rates, property maintenance and other such expenses.

It’s a good idea to discuss your specific circumstances with a financial advisor for a detailed saving plan, but making a calculation using the figure of 70% provides a good basic guide. Try one of the many nifty online retirement savings calculators to work out exactly how much you should be saving each week. Remember, the earlier you start, the easier it will be to meet your savings goal!

What kind of retirement savings account should I have?
Although it may seem like a stretch to save anything, it’s well worth putting some money aside for your retirement. The type of savings account that will reap the most rewards is one with a system of compound interest. This means that your saved dollars work for you, earning more interest as you go. This means that your earnings are invested and re-invested, creating a cumulative effect that is great news for your bank balance. Talk it over with your local New Zealand bank to get the best interest rates and find the account which will work best for you.

Are there other kinds of investment that could help me save?
Although there are other options when saving for retirement, most New Zealanders choose to save cash and earn a fixed rate of interest on that capital. A riskier option is investing in the share market, a choice which many planning for retirement avoid because of the higher level of risk. An investment with a higher risk also offers a potentially higher reward – investing in assets such as shares will allow your investment to grow, while a savings account will not adjust with inflation. Talk to a New Zealand financial advisor about your options.

What if I have to stop work before I turn 65?
You may not be able to work right up until the age of 65. Illness, family circumstances or redundancy can force you to stop work earlier than you had planned. If you want to protect you and your family against this, you can purchase income insurance, which will protect your earnings level up until the age of 65. Browse the NZS.com directory for New Zealand insurance providers.

So, in summary…
If there’s one golden rule about saving for retirement, it’s ‘Start saving and planning now.’ It’s never too early or too late to start saving for your retirement. The earlier you begin, the greater your chances of enjoying a stress-free, comfortable retirement. Whatever our financial situation, we all need to plan for a time when we’ll no longer be able to work. Starting early means saving can be done without having a huge impact on your current lifestyle. Starting at mid-life or later requires a more aggressive retirement saving strategy, but don’t feel put off by the task at hand. In this case, it’s best to consult a professional financial advisor, who will put you on the path to your financial goal.

This article was kindly supplied by NZS.