• Trustees Private Wealth

Mar 29, 2023

Can you afford to retire?

Retirement is an important stage of life that we all look forward to. After years of hard work, we deserve to enjoy the fruits of our labour and live our lives on our own terms. However, the common question that arises is – can you afford to retire? It's important to consider this question before making any hasty decisions, especially in New Zealand’s current financial climate, where the cost of living is high, and unexpected expenses can arise.

Plan Ahead

The first step in answering this question is to determine how much money you will need to retire comfortably. The amount you will need will depend on various factors, including your lifestyle, housing costs, healthcare needs, and travel plans. It's important to create a retirement budget and to include all of your expenses to determine how much you will need.

A cost that is often overlooked and not budgeted for is healthcare. As you age you may require more medical attention, which can be costly. In New Zealand, the majority of healthcare services are publicly funded, but there are still costs associated such as prescriptions, dental care and long-term care. Therefore, it is important to consider these costs and budget for any unexpected healthcare expenses. It may be worthwhile to consider purchasing health insurance to help cover any unexpected medical bills.

Subsequent to this, you need to determine how you will generate income during your retirement. This will depend on your savings, investments, pensions, and any other sources of income you may have. In New Zealand, the government provides a retirement income through New Zealand Superannuation (NZ Super), which is a universal pension for residents over the age of 65. After tax, single people living alone will receive $496 a week, equating to $25,792 a year. Qualifying couples may be eligible to receive $763 a week, equating to $39,676 per year.* Tax code M April 2023. However, this may not be enough to cover all your expenses, especially if you have high living costs or health care needs.  A recent study on retirement expenditure guidelines highlights that a retired couple living in metropolitan New Zealand typically require $800-$900 per week income in addition to their NZ Super for a choices lifestyle.

Supplement Your Income

When edging towards retirement you will likely have a list of different things you would like to do with your time. Whether that be travel, new hobbies, or pursuing interests that you didn’t have time for in your working years. This can be costly, especially if there are dozens of things on your ‘To-Do List’. To be able to fulfil these wants you may need to supplement your income over and above what you can receive from the government.

To generate additional income, you may need to consider other investment options such as term deposits, property, shares, bonds, or managed funds. Our team of financial advisers at Trustees Executors Private Wealth can help you to determine which investment options are best suited for you based on your financial goals, risk tolerance, and timeline. By investing wisely, you can create a diversified portfolio that will generate passive inflation linked income during your retirement years.

By improving how your existing assets are managed, you can create additional stable streams of income, while keeping financial risks low. The key to this is understanding financial risk, and working closely with a trusted and competent financial adviser. At Trustees Executors, our financial advisers will work with you to set long term goals and develop a diversified investment plan that’s affordable, safe, and tailored to your specific needs. They can help you not only to retire on time, but to do so with a stable passive income that isn’t vulnerable to changing economic circumstances.

KiwiSaver is designed to assist with your retirement planning and discussing your KiiwSaver and options with one of our financial advisers will add value to your retirement planning.

Alternatively, if even after your thorough retirement planning you still feel as though your finances will not be enough to support your retirement plans, it is important to consider pushing out your retirement if you can. Maybe consider a less physical job, a job with reduced hours, or a job that enables you to work from home. Some retirees also choose to downsize their homes or move to more affordable areas to reduce their living costs.

Mistakes to Avoid

One mistake that people often make when planning for retirement is underestimating their life expectancy. Many people assume that they will only live until their mid-70s or early 80s, but the reality is that people are living longer. In fact, the average life expectancy in New Zealand is around 83 years for men and 86 years for women. Therefore, it's important to plan for a longer retirement to ensure that you have enough money to support yourself for the rest of your life. To avoid falling short of cash, you should plan to have enough money to sustain your desired lifestyle for at least 25-30 years after retirement.

Something that is often overlooked and an easy mistake to make is accounting for inflation. The cost of living is constantly increasing, and your retirement budget needs to account for this. You may need to adjust your retirement budget annually to ensure that you have enough money to cover your expenses.

Failing to properly protect your assets is another huge mistake that you want to avoid at all costs. This can be an easy fix. Our team of financial experts at Trustees Executors can help you with asset and estate planning that is suitable for your needs. There are many different ways that things can go wrong if your assets aren’t well protected. Family deaths, business debts, or natural disasters are only just a few ways that your assets can be significantly impacted. By ensuring you have an up-to-date Will, Enduring Powers of Attorney, Trusts, and insurances, your assets can be well protected from any potential disasters.

Moving into Retirement

It's important to consider your legacy and how you want to distribute your assets after you pass away. This may include leaving assets to family members, charities, or other organisations. Our financial advisers can help you develop a plan that ensures your assets are distributed according to your wishes.

Retirement is a significant milestone that requires careful planning and consideration. It's important to determine how much money you will need to retire comfortably, how you will generate income, and to avoid common mistakes. By working with our trusted financial advisers at Trustees Executors, we can help you to develop a plan that ensures you can retire on time, with a stable passive income, and the peace of mind that comes with knowing you have planned for the future. Remember, retirement is a journey, and it is never too late to start planning. So, can you afford to retire? With the right planning and preparation, the answer is yes!

Contact us today to find out more, or to start working with our Private Wealth Experts to help guide you into a happy, stress-free retirement.

Call us on 0800 878 783 or email us at [email protected]

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