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How much money do I really need to retire

*What’s the magic figure you need for a great retirement? Here's everything you need to know* How much you need to retire depends on your own personal circumstances and what you…

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12 November 2020

What’s the magic figure you need for a great retirement? Here's everything you need to know

How much you need to retire depends on your own personal circumstances and what you expect out of your retirement. The easiest way to find out if you're on track for your retirement is to build your personalised KiwiSaver portfolio in under 2 minutes through the button below. Our tool does the maths for you, so you don't have to.

The main things to consider when calculating how much you need for retirement

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Determining how much weekly retirement income you need: What the research says

When assessing how much you need to retire you shouldn't get wowed by big savings numbers. Figures that KiwiSaver calculators show you, like $500,000 or $825,000 may seem like a lot right now, but you don’t know if that figure will give you the retirement you’re expecting.

Instead, focus on what that would be as a weekly income (adjusted for inflation).  Your weekly income is what your spending power will be when you hit 65 and is the easiest thing to compare to your current spending power (what your money buys you today).

  • International research is consistent in stating that you need at least 70% of your pre-tax income after you retire for you to have a comfortable retirement. This is assuming you already own a house and have paid off the mortgage on your home.

  • For the current generation of renters, research suggests that your savings should then give you 100% of your current income in retirement (this is for those of us who don't ever plan on getting a mortgage or are unable to afford one).

  • That means if you earn an annual income of $80,000, you'll currently have a take-home income of $1,159 after tax and KiwiSaver contributions. To be comfortable in retirement, you will need an income of $811 (70% of your income) or $1,159 (100% of your income). 

Saving 100% of your pre-retirement income sounds high. But, research shows a lot of people end up spending more than their current income in retirement. Aiming to save 100% of your income allows you that financial flexibility to take up the things you love doing.

The table below will give you a useful picture of how much you need to live a comfortable retirement, and is based off an annual study by Massey University.

New Zealand Retirement Expenditure Guidelines

  1 person household 2 person household
  Metro Provincial Metro Provincial
No frills budget $598 $569 $885 $630
Choices budget $1,190 $834 $1,418 $1,118

Source: Massey University. Figures mentioned are weekly income/household.


How much do you need for your dream retirement?

While international and domestic research provides a good benchmark, it's pretty generic; we think it is always useful to create a budget taking into account the life that you want to live in your retirement.  You may want to go on a cruise every year, turn a hobby into a part-time gig to keep the income flowing, or leave the big city and put your feet up surrounded by nature.

A simple exercise you can do to figure out your figure is to work out the below:

  • What are your current household expenses?
  • What expenses will you no longer have when you enter retirement (kids, mortgage payments, car repayments and other such big-ticket items)
  • What are the additional things you would like to do in retirement and how much are they likely to cost?
  • Add these up and then add a 10 - 20 % buffer to provide for the unexpected costs that will inevitably crop up like your house requiring maintenance.
  • Use the Kōura advice tool to see whether you are on track for a comfortable retirement.
  • Revisit these figures annually to ensure you're tracking well against your goals


Why worry about retirement when everyone will get NZ Super?

Us Kiwis are very lucky to have NZ Superannuation (also known as NZ Super) - the government pension paid to Kiwis over the age of 65. Any New Zealander that has lived in NZ for over 10 years can receive NZ Super and it's not income tested, meaning you receive it regardless of what your income or assets are.

NZ Super rates are:

  • $424 per week (after tax) for a person living alone, and
  • $326 per person for a married couple (as of April 1, 2020)

However, this income isn't a sure thing. There's significant debate about whether NZ Super will remain in place and be available to everyone.  We're one of the only countries in the world to have universal Superannuation scheme. 

There's a significant chance that NZ Super could become means-tested (i.e. will depend on your income or assets) in the future or that the authorities change their mind about the eligibility age (e.g. making it 69 instead of 65). In figuring out your retirement pot, we suggest you think about a downside scenario where you may not end up not qualifying to receive the full amount.


What does it all mean when it comes to contributing to your KiwiSaver?

While it's great to see the money you will need every week, you need to understand how to translate that into a KiwiSaver balance. 

Set out below is an example of Ben and Rachel. It shows their current income and what percentage of their salary they should be contributing to have the retirement they want:

KiwiSaver Savings Goal Indication Ben Rachel
Current pre-tax income $80,000/year $150,000/year
Current weekly income (after tax & KiwiSaver deductions) $1,159/week $1,774/week
KiwiSaver balance required to deliver equivalent income (inc NZ Super) $1.4million $2.8million
Employee contribution rate required to deliver KiwiSaver balance 10.4%


  • If Ben and Rachel  started their KiwiSavers at the age of 30 (after buying a home), Ben would only have $592k and Rachel would have $1.1m. This is significantly smaller than the $1.4m or $2.8m that they would need to retire with a similar income.

  • The ideal option for Ben and Rachel would be to increase their KiwiSaver contributions. To reach the 70% rate, they will need to contribute between 10-12% of their incomes into their individual KiwiSaver accounts.

Most people are only contribute 3% of their salary to their KiwiSaver account as this is the amount that's matched by their employer. Unfortunately, this is not going to give people anywhere near enough to fund the retirement they are expecting!

Sure, your mortgage-free home is an important financial asset that can be used to fund your retirement, but you need to remember that if you sell your house, your ongoing living costs will increase as you now have to pay rent! The better option would be to downsize to a smaller home, thereby releasing some equity. Though, with the rate housing prices are increasing in New Zealand, you may not get as much bang for your buck!

To conclude

Ultimately, your own retirement needs will depend on your personal circumstances. Think hard about the sources of income you may have at retirements like part-time income, NZ Super and your KiwiSaver fund. But think harder about your future expenses, taking into account possibilities like having to support older or younger dependants in some ways, higher healthcare costs and the possibility of redundancy.


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