Many people don’t realise they may need to keep working for longer to afford life in retirement, says wealth adviser Simon Hepple.

And he warns that at first you’re likely to need a similar amount of money in retirement as you’re earning now.

Hepple, of Pie Funds, says the income you need in retirement will be affected by your goals, spending, income, assets, and your New Zealand Superannuation income.

“When I’m at a dinner party and people discover I’m a financial adviser, the conversation often turns to retirement,” he says.

“I can’t tell you the number of times I have been asked ‘Exactly what amount of money do I need to retire?’

“People expect that I can readily give an answer off-hand, but without knowing anything about someone’s individual circumstances, it’s impossible to answer.

“The truth is that there’s no one number that fits every situation.”

He says there are a few important things he needs to know before he can answer – people’s usual expenditure, income, goals, liabilities, and the assets they can use in retirement.

It’s more expensive at the start

“The most important issue is what you envision spending in retirement. In my experience, this question should be broken into two parts,” Hepple says.

“If retirement happens before or slightly after 65 years of age, I find that most clients want to travel and see the world, maybe buy a motorhome or boat, spend time with the grandchildren, and generally do everything that wasn’t possible while they were in the workforce.

He says this busy lifestyle stage can go on for 15 years, or longer.

“Generally, outgoings in this period are similar, if not higher, than when you were in the workforce.”

You’ll begin to slow down

He says the second stage of retirement is usually from around 75 to 80 years of age onwards, although this differs from person to person.

“Eventually, you’ll get sick of the long-haul flights to Europe – and the boat, motorhome and bach will be used far less frequently, if at all, because you’ll prefer to do things locally.

“This is generally a cheaper stage of retirement in most cases, if the medical costs are not sneaking up already.”

He says there’s a lot of misinformation about New Zealand Superannuation in the media.

“We have universal superannuation in New Zealand, which provides a regular income after you reach your 65th birthday. This also means that you receive this, regardless of assets and even whether you leave the workforce.”

NZ Super makes life easier

New Zealand Superannuation provides an income of NZ$20,290pa if you’re on your own, or NZ$31,215 for a couple, assuming you’re both over 65 years of age.

“This can make all the difference for some people between ‘enjoying’ retirement and ‘surviving’ retirement,” says Hepple.

“You’ll also get an income from your investments, including KiwiSaver, assuming you have something saved. If you don’t have savings or investments, retirement will be bleak.”

Hepple says once you’ve worked out your likely spending in retirement and potential income from all sources, you’ll know what your shortfall is.

“You must make an allowance for inflation and allow for a generous life expectancy to ensure that you cover some other key risks too.

“Constantly review your situation to ensure that it is working optimally for you.”

Simon Hepple is a wealth adviser at Pie Funds Management Ltd. piefunds.co.nz.

By Brenda Ward

First published 15 March 2018

JUNO does not contain financial advice as defined by the Financial Advisers Act 2008. Consult a suitably qualified financial adviser before making investment decisions. This story reflects the views of the contributor only. Content comes from sources that JUNO considers accurate, but we do not guarantee that the content is accurate. Simon Hepple is an Authorised Financial Adviser and a disclosure statement is available on request and free of charge at www.piefunds.co.nz.