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Are you worried about running out of money during retirement? Is your nest-egg ready?

unnamed.jpgIf you dream of financial peace of mind and having more than enough to retire on, consider this; many people live well beyond the traditional age of 65 for retirement. In fact, many people are living well into their 80s and 90s. Life expectancy in NZ is set to hit 85 years soon! Are you prepared for retirement?


You may want to enjoy 20-30yrs or more away from work having time to relax, go on holidays and spend time with friends and family. However, the trend is shifting these days with more and more people working beyond the traditional retirement age of 65. The benefits of earning an income, sometimes with reduced part-time hours, while keeping engaged in the workforce is very appealing for some... Wouldn’t it be nice to have the choice though? Continuing work due to the love of the job rather than out of necessity. Needing to work is far less desirable than choosing to work. There’s a big difference.


It’s scary to think someone who accumulates $1 million during their working years would still have to step down to a more subdued lifestyle in retirement than the one to which they've grown accustomed. When your paychecks stop flowing, the way you handle your finances needs to change too. A loss of full-time income can be combatted by continuing to work part-time and through investments. Let’s look at a typical scenario (ignoring inflation, interest, and assuming you’d like to leave an inheritance); a couple who saves $1,000,000 before retiring at 65 will have $50,000 each year for 20 years of retirement. Yes, there’s NZ Super, but it’s a drop in the ocean and may not be around forever. Chances are this is less than you’re earning now.

Use our retirement calculator below to get a feel for how much you will need to save to retire comfortably.


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Recent studies in Canada (quite similar to NZ) show that a significant proportion of people have doubts regarding the path to a successful retirement. 41% of people surveyed feel they lack sufficient knowledge regarding how much retirement income they will need. Lots of people are confused about the numbers. Also, 37% were unaware of how taxes will affect their retirement savings and income. Despite this lack of certainty, only 22% of respondents have a written financial plan and only 33% work with a financial advisor. Working with an advisor brings peace of mind and accountability. You’re protecting yourself when seeking advice from experts. Leaving investment and retirement decisions until you’re getting close to retirement is comparable to gambling with your future.


Other results find that more than 1/3 of people in the workforce believe they risk running out of money in retirement. I suspect it’s the same story in NZ, maybe even worse.  There is a safer option, certainty comes at a price, but uncertainty could well be unaffordable. No one claims retirement planning is easy… You don’t have to know all the answers but planning is key to understanding your position and options.  Uncertainty can lead to stress and mistakes with investments but getting things down on paper can help combat this.


One of the first questions I ask clients when discussing their retirement plan is, ‘how much income do you need to maintain your current lifestyle in retirement?’ Not surprisingly, for the vast majority the answer is, “I don’t know,” or they’ve made an inaccurate assumption. If the assumption is too high, the goal of retirement may seem absolutely unattainable, and the entire planning process is discouraging. If the assumption is too low, which is most often the case, you could run into a difficult financial situation later in life and have to make drastic, unwanted changes.


If you want to have money set aside for holidays and unexpected health care costs you’re going to need to plan on having a bigger nest egg than previously thought. Prior planning will prevent penny pinching and allow you to enjoy life without watching the bank balance too much.


If retirement challenges are things to worry about, then you could be in for a constant state of distress. If retirement challenges bring new experiences that you see as exciting, then things will be much more positive. It’s all in the attitude that you adopt and this is totally up to you. Adopt a positive, optimistic attitude and retirement will be a much more pleasant experience. The choice is yours.


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