Photo: RNZ
One KiwiSaver provider says there is "no way" that people would want to retire with less than $1 million.
Rupert Carlyon, founder of Koura Wealth, said how much people needed to save for retirement would depend on the sort of lifestyle they wanted. But he said it would easily run into seven digits.
Carlyon said international research indicated something between 70 percent and 100 percent of a person's pre-retirement income was needed in retirement, and the "big spending" periods happened in the first 10 years, when people wanted to celebrate not working, and in the last 10 years, when they spent it on healthcare.
"If we model it out for someone earning $120,000 today [who has post tax income of $87,644 per year] and wants to live until 95, also assume they get $400 per week from NZ Super… If they keep it invested in a balanced fund earning 3.5 percent they will need [for 70 percent replacement] a starting balance of $1.1 million [and for 100 percent replacement] a starting balance of $1.8m.
"The truth though is that people are also working longer and learn to adapt. I suspect the honest truth is the number is closer to $1m than $2m. But no way would you want to retire with less than $1m."
NZ Super pays $519 a week after tax for a single person - or two lots of $400 for a couple.
Actuaries suggest that it is reasonable to forecast taking 4 percent of the starting value of your investment fund each year as income. That means if you want to have $60,000 in income above the pension, you would need to have about $1.5 million.
Massey University research last year estimated, a single person in a metro area would need a lump sum of $717,000 for a choices life, with a few luxuries. A two-person household would need almost $1 million in a metro centre. In the provinces, it was not much easier - a choices life for a single person would cost $824,000 and $609,000 for a couple. That data will be updated soon.
Retirement Commissioner Jane Wrightson said it was people's savings and investments that would help make retirement more comfortable and enjoyable.
"People are living longer these days. On average, 80 percent of 65-year-old men can now expect to live until they're 90, and 65-year-old women until they're 94.
"If you plan to stop working at 65, and many don't, on top of NZ Super most will need to save and invest, or have another plan, to provide the income you want for 25 to 30 years or more. The Sorted retirement calculator can help you with some assumptions. It's also important to remember, if you have savings, that your spending in retirement is likely to gradually reduce over time. Plan for higher amounts until perhaps your early-mid 70s, while you enjoy your new-found freedom, then reduce a bit after that. Don't be scared to ask for advice."
Financial coach Liz Koh said the ball park she suggested was to have saved about one third to a half the value of a person's house.
"So if you have a house worth $1m then $300,000 to $500,000, and if it's worth $2m then twice that."
She said the cost of a house was a proxy for lifestyle and the area that people lived in.
"Cities are much more expensive to retire in."
Koh says you're not alone if you don't have $1m to retire on.
"There are few people who have $1m to $2m. They would be in the top few percent of the population."
An 18-year-old starting out in KiwiSaver earning $50,000 is on track to save about $340,000 by 65 in a growth fund - but that assumes no withdrawal for a first home.
To save $500,000, that person would need to save more like 6 percent of their income - or have their income increase faster than average over their career.
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