Is it ever too late to start retirement planning?

OPINION: The great fear of people approaching retirement age is whether their retirement savings will be enough to last the distance once they stop earning.

Even worse is the terrible prospect that despite their best endeavours, they have been doing things wrong – so wrong that they are well behind where they need to be.

There are plenty of mistakes that people make when saving and investing which can leave them well short at retirement. Here are just a few:

  • Not owning a debt-free property. Having to pay rent or a mortgage in retirement means you will need significantly more savings to fund your retirement
  • Not paying off the mortgage on the family home quickly enough. The sooner your mortgage is repaid the more you will be able to save for retirement.
  • Not saving enough or not saving on a regular basis. It is important to work out how much you need to save and put that money aside through regular contributions to an investment account.
  • Not joining a subsidised superannuation scheme such as KiwiSaver. Government and employer subsidies will add extra money to your retirement fund. Saving regularly over the long term will compound your investment returns.
  • Investing too conservatively over the long term, resulting in low investment returns. Make sure you have chosen the most appropriate KiwiSaver investment option for your investment time frame to maximise your investment returns without taking on too much risk.
  • Having insufficient life insurance, income protection or health insurance. In the event of illness or death, you or your partner can experience long term financial hardship if you are underinsured.
  • Failing to protect financial assets in a relationship or making poor financial choices after a relationship breakdown. Separation and divorce can create a major financial setback which is hard to recover from, especially later in life.

If you are a few years away from retirement and have suddenly realised you are not prepared, urgent action is required.

Start by working out how much you will need.

Prepare a retirement budget for expenses by looking at your current budget and taking out expenses that will no longer apply (for example transport to work) or luxuries that will not be affordable with your new level of income. Add in some new items to cover expenses for the activities you would like to do in retirement, such as joining clubs, playing sports or travelling.

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Compare your total expenses with what you expect your retirement income to be.

Current rates of NZ Superannuation are available from Any shortfall of income will need to be covered by investments. Use an online retirement calculator (there is a good one at to see how much money you will need as a lump sum to cover future retirement income.

You may need to add to this amount to allow for big items such as replacing your car or redecorating your house. As a rule of thumb, you will need a lump sum of around $180,000 to provide an additional income of $10,000 after tax per year over a 20-year period.

Look at options for increasing your savings.

Firstly, make sure you are not making any of the mistakes listed above.

For the last few years before you stop work, try and live on what your future retirement income will be. That way, you will not only save more but you will start to adjust your standard of living to the new level.

If you are planning to downsize your house, do it well before you retire, so as to free up funds that can be invested for a good return. Ideally, by retirement your house should be no more than three-quarters of the value of your total assets (house and investments), otherwise you are likely to be asset-rich and cash-poor.

If you are renting, consider taking in a boarder or two once the kids leave home, moving to a house with lower rent, or moving in with family, even if it is just for a while, so you can save.

Choosing to keep working for a few years after the age of 65 and saving all your superannuation income will be a big help towards building a nest egg for when you work less or not at all.

Review your KiwiSaver fund.

Make sure you are receiving the full amount of annual tax credit that is available to you by contributing at least $1042 per annum and check that your money is invested in the right fund by comparing the options that are available from your provider.

The key ingredient for saving and investing is time. The earlier you establish your financial situation and the changes you need to make, the less your financial risk will be.

Liz Koh is an authorised financial Aadviser and retirement planning specialist ( The advice given here is general and does not constitute specific advice to any person. A disclosure statement can be obtained free of charge by calling 0800 273 847.


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