Author Katrina Shanks, CEO Financial Advice NZ Article originally published in

Retirement is often included in lists of the most stressful life events, which is why it’s important to prepare and plan for it. One of the more important preparations is the financial resources required to meet a person’s needs. In this article, the first in a three-part series, Financial Advice New Zealand chief executive Katrina Shanks examines the findings of the 2021 Retirement Expenditure Guidelines.

A recent summation of how New Zealanders are preparing for retirement couldn’t have been more accurate or succinct: we’re “sleepwalking” our way into it.

It was a comment from a speaker at the Older Person’s Forum last year hosted by the Te Ara Ahunga Ora Retirement Commission, and appears in Massey University’s Fin-Ed Centre’s 2021 New Zealand Retirement Expenditure Guidelines, published in association with Financial Advice NZ and Consilium.

The “sleepwalking” description reveals a concerning level of apathy that’s been reflected in various statistics and surveys in recent years.

One, a Facebook survey in 2017 on New Zealanders’ top financial anxiety, revealed lack of retirement savings was way down the list.

Just 9 per cent said that was their biggest concern – behind lack of emergency savings (21 per cent), housing affordability (19 per cent), and mortgage payments and credit card debt (both 10 per cent). This may explain why those in their 50s who should be focused on retirement savings get such a shock when they see what the gap is in this report.

The report said just 9 per cent being worried about retirement was “not surprising, given that retirement is so far off for many”.

And that’s the point. For many people it’s a case of out of sight, out of mind.

But it’s an attitude that needs to change if people are to have any sort of comfortable retirement. To work your whole life then retire on an income that’s difficult to survive on doesn’t seem fair or right. That’s why you need to start planning early.

The Retirement Expenditure Guidelines, which use Statistics NZ’s triennial 2018/19 Household Economic Survey, paint a clear picture of the problem.

It looked at two levels of expenditure for eight retired household groups. The levels of expenditure are: No Frills guidelines, which reflect a basic standard of living that includes few, if any, luxuries, and Choices guidelines, which represent a more comfortable standard of living, including some luxuries or treats. The household groups were one-person and two-person households on No Frills and Choices in metro and provincial settings.

That may sound complicated, but it’s actually easy to see what you need for your retirement, based on your circumstances.

It found that in the past year, the increase in total expenditure needed by retired people to maintain either a No-Frills or a Choices lifestyle, in either metro or provincial areas, increased by an average of 3.48 per cent. For a two-person No-Frills household in a city that was an increase in costs of $29.60 per week, while a Choices household jumped $46.97. The biggest increase was $49.50 a week for one person living in a provincial area and choosing a Choices lifestyle, while the smallest was $18.82 for one person on a No Frills budget.

For people on fixed incomes, these are big increases.

Significantly, the change for four of the groups was above the rate of inflation for the period, while one matched it and three were below it. The report said the overall inflation rate for each household group resulted from the interaction of many items, but it identified transport, restaurant and ready-to-eat food as contributing more than the inflation rate for each group.

The report then compared the difference between the total expenditure of each household group and the rate of NZ Superannuation as at April 1 this year.

What it found will be a shock to pre-retirees who haven’t yet thought about their retirement.

None of the groups, not even the one with the lowest expenditure – the one-person provincial household spending $604.92 per week – got anywhere near having those costs covered by super. With super of $436.94 a week, people in that group were $167.98 short.

But those most in deficit were those in two-person Choices households living in a city. Their super of $672.22 was a whopping $798.04 short of their weekly expenditure of $1470.26.

The guidelines then calculated the lump sum each group would need at retirement to fund spending over and above NZ Superannuation, assuming no other income. It also calculated the weekly savings required to achieve that sum.

They found our lowest-expenditure No Frills retiree living in the provinces with a deficit of $167.98 per week would need to have a lump sum of $170,000 upon retirement to achieve that lifestyle. To achieve that, they would have to save $185 a week if they started saving at age 50. But just $47 if they started saving at 25.

At the other end of the scale, two people wishing to live a Choices lifestyle in the city (remember, a more comfortable standard of living, including some luxuries or treats) would a lump sum of $809,000 upon retirement to overcome their weekly deficit of $798.04 per week. To achieve that they would have to save a whopping $917 a week if they started at age 50, but just $251 if they started at 25.

They’re stark numbers but they’re real, and the clear lesson for pre-retirees is you need a plan – right now. The younger you start saving, the less you need to save each week.

This is an interesting barbecue discussion. Start the conversation this summer and begin the journey of financial planning and preparing yourself for your future.

But it’s not just about savings and investments – there are other aspects of retirement to think about, many of which will affect your financial planning for retirement in some way. In Part Two we’ll look at what options the guidelines offers for these.