The Retirement Income Interest Group (RIIG) has released its 2022 report, which does not make for good reading for those about to retire. Taking a range of anonymous data from various KiwiSaver providers, they have found that those currently aged 45-59 are estimated to have a balance of $124,400 (median) when they reach retirement age in the coming two decades. According to National Capital Director Clive Fernandes, more than $124,000 will be needed to secure approximately $1000 per week, which the average Kiwi will need as retirement income.
This data only considers those actively contributing to their Kiwisaver accounts and suggests that around 20% of Kiwis aged 45-64 were not contributing.
Importance of Personalized Financial Advice
Among the findings, RIIG suggests that "for those invested in the most conservative funds with no growth assets, negative real growth in the balance is likely as fees and inflation outstrip investment return."
This highlights the importance of financial advice for KiwiSaver members. What might savings at retirement look like if personalized financial advice were accessible?
Clive says, "The average Kiwi could have up to $40,000 more in their KiwiSaver account by being in the right fund."
Clive firmly believes in education, personalized advice, and informed decision-making. Information can be hard to understand in the finance world, often full of industry terms and phrases, creating barriers for many not in financial circles.
Ensuring Retirement Security Through Financial Planning
Helping KiwiSaver members understand the process is the first step to building trust. Fernandes says informed decision-making with regard to KiwiSaver can have numerous benefits. For one, it can help members make better investment decisions, leading to higher returns and financial stability. It can also help people avoid making costly mistakes, such as reacting to market volatility without understanding what volatility is. Additionally, education and advice can help individuals make more informed decisions about managing their money, leading to better financial planning and budgeting.
The projected balances from the RIIG report suggest that many Kiwis won't have enough money for retirement, relying heavily on superannuation payments. The weekly government payout is not enough for the typical Kiwi retirement. A lot needs to be achieved to change this trajectory.
Financial planning for retirement for many can seem like a job for the distant future, but it is a sudden necessity for those approaching retirement. As retirement approaches, older people need to begin thinking about their financial planning. This includes considering how much money will be required to support their desired lifestyle during retirement and determining the best way to save and invest to reach their financial goals. Some key steps in financial planning for retirement include: evaluating current savings and investments, estimating future expenses and income, setting financial goals, creating a budget, and making a plan to reach those goals.
"Once someone has determined their retirement goals, they can use strategies like a 'bucketing' approach which allows individuals to continue investing whilst also having security in their KiwiSaver balance," said Fernandes.
Whilst the RIIG report on future KiwiSaver balances and implications for retirement is a shock, it could be the 'wake-up' call needed to promote change.