Retirement planning: Four questions to ask yourself

More than four out of five Kiwis believe that retirement is the start of something new, which is a good thing, considering that making any fresh start takes planning.

Retirement is our Third Act. It’s our time to try new things, do all the things we’ve never had time to do before, and generally, spend as much time as we want doing whatever we want, whenever we want.

By its very nature, that means that retirement doesn’t have to be planned out step by step, year by year. But it does mean that you at least need a general blueprint.

Understanding your retirement needs

From road trips to retirement, the first step of any new adventure requires knowing what you’ll need along the way. There are four broad questions to ask yourself to figure this one out.

Begin by asking yourself what kind of retirement you’d like. Will it be spent in a tiny house by your favourite beach doing nothing but reading books? Or is it travelling the world, visiting friends and family, and ticking off bucket list adventures?

Answering the first question will lead you to this second one: What’s it all going to cost? A tiny house might not cost too much, and that stack of books shouldn’t blow the budget either. Meanwhile a round-the-world ticket may burn a flaming hole through those retirement savings faster than you can say ‘all expenses included’.

Next question – how can you keep those costs under control? Selling a larger home you’ve been living in to downsize and fund your adventures is one option that many people consider (especially with the housing market making a beeline for the stratosphere at the moment), although setting a more realistic goal and stricter budget for those adventures is often the alternative route.

And finally, what kind of risk are you comfortable with? When setting a budget for your retirement, you might prefer to spend the first few years burning through your savings then live frugally afterwards, or you might have more of a slow-and-steady kind of personality.

How to plan for your superannuation strategy

Your superannuation strategy could be a way of getting the most out of the savings you already have, and maximising every cent you put in.

You may wish to look into any government schemes that can help boost your super. For example, if Kiwis put at least $1,042.86 in their Kiwisaver accounts in the year to June 30, the government will top that up by a little over $520. Every year.

Another potential option to consider is increasing the percentage of employee contributions you’re making through work before you retire. The default rate is 3%, but you can go as high as 10% if you wish, which means that 10% of your salary will go straight to your superannuation. A benefit here also is that it comes out of your pre-tax salary. 

You can also chat to your Kiwisaver provider about ways to maximise your savings, so you can get the most out of your retirement fund.

Tips for creating a superannuation strategy

  • Look into any government schemes you can take advantage of
  • Consider increasing your salary contribution through your employer, if it fits within your personal needs
  • Speak to a financial advisor about your investment mix
  • Use a retirement planner calculator to see if you’re on track with your savings
  • Do a practice month of living off how much you expect to spend per month during retirement to test if it is difficult, realistic, or even more than you need
  • Consider asking your employer about flexible working options (such as working just two days a week for plenty of time off while retaining some income).

Look, nobody said planning for retirement was easy. There’s a lot to think about, especially when 81% of us would rather not think about how long they are going to live for (which is, in all honesty, a major factor in retirement planning). It will take a bit of time to wrap your head around, figure out a plan, and put it all into action.

At least there is one thing that’s simple – funeral insurance. It only takes a couple of minutes to get a quote, then you get set up monthly payments, knowing your loved ones will receive a lump sum to help cover your funeral costs (and any other expenses) when you pass away.

This article is an opinion only, provided for general information purposes and shouldn’t be considered or relied upon as professional or personal advice. If you have legal, tax, or financial questions, you should contact an appropriate professional.