Advice matters
How many years of retirement should I plan for?

When we think about the future, most of us probably hope for a long and happy retirement.

As a whole, New Zealanders are living longer, which means many people get to experience many decades of retirement.

But while that’s great from a personal perspective, it can raise some financial questions.

How many years should you really plan to pay for in retirement?

Estimating your life expectancy

Stats NZ data paints a broad picture of how long you might be able to expect to live.

It offers a calculator that allows you to put in your birthdate for a more personalised picture. This data is based on the actual death rates of New Zealanders and national population projections.

It shows that a 41-year-old woman born in 1983 could expect to live to between 87.1 (based on high death rates) and 90.7 (based on low death rates).

That means, assuming that person retires at 65, she could have roughly 25 years of retirement to pay for.

Factors such as your health and family history may also give you a sense of your likely life expectancy.

Healthcare costs can add up

Our longer lives mean more healthcare expenses, too.

A study from 2019 showed that while New Zealanders’ life expectancy had increased, their “health expectancy” was not increasing at the same rate – so people were living longer in poor health.

This may be something to factor into your retirement planning. Where would you access care, and how might you pay for it? Would insurance be available, or would you rely on the public system? If you needed help in your home, could you turn to family, or would you need to pay for this?

Your lifestyle

Another factor that influences how much money you might need to save for retirement is the type of lifestyle you’d like to have, and how long you might like to live that way.

Massey University research shows a marked difference between the cost of a “choices” retirement – $1163.09 a week in metro centres for a one-person household in 2023 – and a “no frills” lifestyle, at $826.26.

Many retirees find that the earlier years of their retirement are more expensive when it comes to things such as travel and entertainment, and that life may become cheaper later on.

The “health expectancy” data may help to plan the sort of spending you could expect to do through your retirement years.

Take stock

It can be helpful to set time aside to regularly check on your retirement savings and investment portfolio.

As time goes on, you may need to tweak your risk exposure or investment strategy to ensure that you remain on track for your goals.

When you have a clear idea of the lump sum that you are likely to have accumulated by the time you stop work, you may then choose to put some time into planning how you might use that money. Advice can be very helpful through the decumulation phase as well as through accumulation.

Reviewing and adjusting your portfolio as time goes on can help you to ensure your decisions remain appropriate.

Chat to family

If it’s likely that you’ll be able to draw on some family support – whether that’s financial or physical – it could be a good idea to talk to them early on to ensure that everyone has similar expectations.

Like to chat?

If you’d like some advice on any aspect of your retirement plan or wealth planning more generally, get in touch. We can help you look at your current settings and likely outcomes and determine whether you are on track for the sort of retirement you’d hope for.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.