Embarking on the necessary journey of retirement planning is akin to setting sail on uncharted waters. The destination is clear - a secure and comfortable retirement - but the path is riddled with uncertainties. Tackling your plan for retirement savings can be stressful and frustrating, and you may be wondering who can help you out.
If you’re starting to think about saving for retirement, speak to me, David Smart. As an experienced financial adviser, I understand that the decisions made today can shape the quality of life tomorrow. In this guide, we delve into the intricate details of retirement planning, exploring the factors that influence how much one should save for their golden years.
Planning your retirement may seem like a challenge at first, but with the right steps, you can ensure you have a good path set for your future self.
The Factors That Influence Your Retirement Savings
How much should you save for your retirement? There is no one-size-fits-all answer to this question, as your plans for your life could differ from someone else’s. A few factors that will change your retirement plan are:
Retirement Age: The age at which you choose to retire sets the foundation for your financial plan. An early retirement might mean a more extended retirement period, requiring careful financial considerations.
NZ Super And Work Continuation: Determining whether you plan to work beyond the NZ Super entitlement age adds a layer of complexity. It impacts the duration of your savings accumulation phase and the timing of your reliance on retirement funds.
Retirement Expenses: Your desired lifestyle in retirement significantly influences the amount you need to save. From basic necessities to discretionary spending, understanding your expected expenses is crucial when planning your retirement savings plan.
Life Expectancy: Longevity is a double-edged sword. While living longer is a blessing, it necessitates more extended financial sustainability. Estimating your life expectancy helps in crafting a realistic financial plan.
Location of Retirement: The cost of living varies across regions. The location where you retire can impact your expenses, influencing the amount you need to save.
Risks And Contingencies: Anticipating potential risks, such as health conditions, employment interruptions or market fluctuations, allows for a more resilient financial plan.
Support for Dependents: If you plan to provide financial assistance to children or dependents, factoring in these obligations is essential for an accurate savings target.
Legacy Planning: Deciding whether you want to leave a legacy for your children or contribute to charities introduces considerations for the structure and magnitude of your savings.
Current retiree spending patterns provide valuable insights to establish a baseline for retirement savings. According to the Massey University Retirement Expenditure Guideline 2023, individual retirees and retired couples, particularly those opting for a 'Choices' lifestyle in metro areas, spend significant amounts per week.
Individuals with a ‘no frills’ lifestyle spend around $826 per week, whereas individuals with a ‘choices’ lifestyle spend around $1,163 per week. Couples with a ‘no frills’ lifestyle spend around $982 per week, whereas couples with a ‘choices’ lifestyle spend about $1,666 a week.
Comparing these figures with the NZ Super, it's evident that additional savings are imperative for a comfortable retirement. To bridge the gap between NZ Super and desired spending levels, retirees need a lump sum on retirement. The estimated lump sum savings targets, considering location and lifestyle choices, provide benchmarks to guide retirement planning.
For individuals in a provincial area, this lump sum saving target is about $207,000 for ‘no frills’ living and $824,000 for ‘choices’ living. For individuals in metro areas, this target is around $355,000 for ‘no frills’ living and $717,000 for ‘choices’ living.
On the other hand, couples living in provincial areas have a lump sum saving target around $92,000 for ‘no frills’ living and $609,000 for ‘choices’ living. Metro couples can expect a retirement savings target of about $235,000 for ‘no frills’ living and $969,000 for a ‘choices’ lifestyle.
Please note that these estimates are averages only and assume that the retirees each live to around age 90 and that the lump sum is invested in a balanced fund.
Financial Modelling For Personalised Retirement Planning
My commitment lies in employing advanced financial modelling skills to tailor retirement plans. This involves projecting income and expenditure, accounting for potential part-time work and strategically addressing mortgages and liabilities.
Identifying gaps or surpluses between budgeted retirement savings and targets outlined by research is a critical step. Adjustments for desired spending levels and legacy planning ensure a comprehensive and realistic financial plan.
Ensuring your investment portfolio aligns with short-term, medium-term and long-term needs is paramount. Key questions to address include portfolio diversification, risk alignment, exposure to NZ domiciled assets and the choice between direct investment or managed funds.
Considering tax efficiency, ease of administration and portfolio costs is integral to maximising returns. Smart retirement savings extend beyond accumulation, focusing on structured drawdown strategies to avoid excessive or insufficient fund utilisation.
Your Guide To Smart Retirement Savings Plans
Securing a future of financial freedom requires meticulous planning and a tailored approach. As your dedicated financial adviser, I offer not just guidance but a partnership in your journey to a secure retirement. Planning your retirement is an essential step in ensuring you have a happy and comfortable future.
For personalised help, please feel free to reach out on +64 27 543 4455 or contact me through my site’s contact page.
Let's embark on this journey together, turning your retirement aspirations into achievable milestones.