Financial Advice New Zealand, in partnership with Massey University’s Financial Education and Research (Fin-Ed) Centre, has published the 13th edition of the New Zealand Retirement Expenditure Guidelines.
The report serves as a resource for financial advisers, offering detailed insights into the spending habits and financial requirements of retirees across the country.
The guidelines highlighted the dynamic nature of retirement planning, emphasising that plans should be regularly updated to align with changing economic circumstances. With Generation X nearing retirement age and Millennials beginning to engage with long-term financial planning, the report reinforces the importance of proactive and sustained preparation.
A central focus of the guidelines is assisting individuals in determining how much income and savings are necessary to maintain their preferred retirement lifestyles. The data provides benchmarks for spending, enabling advisers to offer guidance on setting budgets and achieving financial goals.
The report explored key risks in retirement planning, including longevity risk – the potential to outlive savings. Strategies to mitigate this risk are critical to ensuring a stable income over the course of retirement.
Additionally, the guidelines analysed the effect of inflation on retirees’ expenses, highlighting the necessity of diversifying income sources beyond New Zealand Superannuation.
Nick Hakes, CEO of Financial Advice New Zealand, emphasised the value the report provides to financial professionals.
“Our members play a critical role in helping individuals navigate these complexities,” he said, adding that the data equips advisers with tools to address longevity risk, optimise savings strategies, and support clients in maintaining a comfortable retirement.
Massey University associate professor Claire Matthews underscored the significance of planning amid fluctuating economic conditions.
“As households continue to spend at levels in excess of NZ Superannuation, New Zealanders need to consider the changing economic environment to determine the savings they need to achieve their retirement objectives,” she said.
The report provided updates on the current state of New Zealand Superannuation and its role in retirement budgets.
The New Zealand Retirement Expenditure Guidelines as at 30 June 2024
|
Weekly NZ Super rates (after tax) |
One-person households |
Two-person households |
|
|
$519.47 |
$779.18 |
|
Total Weekly Expenditure |
Metro |
Provincial |
Metro |
Provincial |
|
No Frills budget |
$687.84 |
$564.25 |
$909.90 |
$1031.85 |
|
Choices budget |
$768.76 |
$752.41 |
$1739.85 |
$1210.18 |
Other notable findings:
Globally, the challenge of securing adequate retirement savings continues to grow. Swiss Re’s Jonathan Graham, head of financial markets, recently spoke with AM Best about the widening retirement savings gap. He attributed this trend to demographic shifts, social changes, and challenges within state pension systems.
“The dependency gap, that’s the ratio of those over 65 to the working population, is expected to increase by 10% up to 2050. That’s taking it up to 25% globally,” he said.
Graham pointed to the life insurance sector as a potential solution for addressing retirement shortfalls. He noted that insurers are well-positioned to develop products that combine savings and protection, helping individuals manage financial risks such as illness or loss of income during retirement.
While the market offers growth opportunities, Graham noted challenges such as the need for innovative product development, increased exposure to financial markets, and regulatory pressures. He predicted that global savings premiums could grow to $4 trillion by 2033, driven by an aging population and the expansion of middle-class demographics, particularly in emerging markets.
