The average Kiwi over 65 years old in New Zealand has a KiwiSaver balance under $50,000. While this sounds like a lot, it will only increase weekly income by $38 in retirement on top of NZ Superannuation. NZ Super is also not enough to live with due to the increasing cost of living, causing a significant issue for retirees wanting to retire at the age of 65.
Figures from New Zealand's largest KiwiSaver provider, ANZ, show balances have risen from an average of $20,000 in 2016 to $48,700 in the year to April 2022.
The ANZ managing director for funds management, Fiona MacKenzie, stated that it was encouraging to see balances growing.
There is a risk people will "struggle to live the lifestyle they want once they stop working," Financial Advice chief executive Katrina Shanks said.
The lump-sum expected for a couple to enjoy a satisfying retirement living in a major city has grown by $24,000 in two years to $809,000. However, those retiring in the provinces need only $511,000, according to research undertaken by Massey University. Even those expecting to live a no-frills lifestyle not in a major city, would require a lump sum equivalent to $170,000.
The single rate for those getting NZ Super is $436.94 a week after-tax, and the rate for couples that both qualified is $672.22. This amount is not enough to retire for many New Zealanders.
"The data can't tell us the whole story, but it is a good way of sparking a conversation and getting people to think about what sort of lifestyle they'd like to have after 65 and whether they are on track financially." said MacKenzie.
The research from ANZ also revealed just over a third (34%) of members aged between 66 and 75, and 11% of members above 75 years old are still making employee contributions to KiwiSaver, indicating they could still be working. However, employers don't have to contribute once a worker turns 65, but some continue to do so. Therefore, the number of Kiwis working above 65 years old could be much higher.
New Zealanders are living longer, and more are working beyond New Zealand’s official retirement age. In addition, there is a lot of pressure on New Zealanders to have larger sums of money in retirement due to the increased living costs. These circumstances make planning for retirement seem daunting. But there are some straightforward things people can do right now which will help set them up for the future. With only NZ super becoming harder to live in retirement, having a KiwiSaver balance prepared is necessary to retire at 65. To assist with retirement expenses, you should ensure you are in a fund that suits your age and risk profile and also make regular contributions.
Everybody’s retirement savings goals will differ according to their financial situation. Those unsure how much they will need for retirement should consult a financial adviser. To make the most of your KiwiSaver investment and find the best fund and provider to set you up for retirement, complete our HealthCheck.