Are you on track for retirement? It’s perhaps the fundamental financial question for anyone aged over 45 because the stakes are so high. Get it wrong and you could be living a hard-scrabble existence into your 70, 80s, and 90s.

But it also goes beyond just the financial questions. Once you do retire, what will you do with your time? Do you want to work at all? Do you want to travel? What are your priorities in your later life?

It’s never too soon to start imaging the kind of retirement you might want, and thinking about what you can do to make your ideal retirement possible.

NZ Super isn’t enough

An astonishing 40 per cent of Kiwis aged 65-plus have almost no income other than their superannuation, according to Older People’s Voices, a report by Te Ara Ahunga Ora Retirement Commission (TAAO). Those individuals told researchers they often had to forgo essentials, including food, health or power.

“It’s a huge concern,” says David Callanan, general manager of Corporate Trustee Services at Public Trust. “NZ Super is there to maintain a minimum quality of life – people find a way to live on it, but it’s pretty tough and they tend to be living hand to mouth.”

He says more people could avoid this position by planning ahead for retirement, particularly when it comes to KiwiSaver. Increasing your contributions can have a small impact on your life now but will make a significant difference once you stop working.

Callanan would like to see higher employer and employee contributions – mandatory employer superannuation contributions in Australia, for example, are 11 per cent. He would also like to see help for people in default funds to engage more with their savings and consider switching to a higher-growth option.

“You can’t just wing it; you have to have a plan for retirement, so you can continue your quality of life beyond your working years,” Callanan says. “Use the power of accumulation and long-term investing – the sooner you start, the sooner you get the benefit of the accumulation. When you get a pay rise or change jobs, it’s the perfect time to think about whether you can increase your KiwiSaver contribution.”

The kind of work you want

That pay rise or job change might also be a catalyst for thinking about how you’ll work after you turn 65, if at all.

When the company Ian Fraser managed went under, he was in his late fifties, and he was surprised by how difficult it was to find another job. He had expected it to be an easy process after a good career in management, but instead it was a struggle. That experience led him to set up Seniors@Work in 2019, a job platform specifically for those aged 50-plus. It’s been growing rapidly over the past four years.

Fraser is now 71, and still enjoying work. He likes the mental challenge, and he appreciates the income; he and his wife are paying off the mortgage and like to visit their two adult children in London. He mixes up a few different part-time jobs, working around 30 hours a week, with a plan to step back a bit once he turns 75.

He’s not the only older Kiwi who’s enjoying work. The 2023 Working Seniors Report found that more than half (51 per cent) of those aged 50-plus say they are “very satisfied” or “extremely satisfied” with their job, and 81 per cent believe that staying in the workforce longer is a good thing for Kiwi seniors.

If you plan to work beyond 65, think ahead, says Fraser. You won’t be able to do a physical job into your 70s, so you may need to pivot towards a lower-impact role. And don’t expect to be able to walk into your dream job, even if your career has been an impressive one.

“The dynamic is different, and recruiters are only interested in your last 10 or 15 years of experience, so rethink your CV,” he advises. “Take up any opportunity to upskill if it’s offered, and consider your transferable skills, don’t shy away from them.”

Financial literacy a boost

You should also take any opportunity to upskill your financial knowledge, because this can have a significant impact on your long-term wealth. Understanding the basics of managing your money, including how and why to invest in different types of assets, leads to more positive outcomes regardless of your level of formal education.

One United States study estimated that people who are financially literate will retire with 30 to 40 per cent more wealth when compared to those with no financial literacy.

“This is a very high number, but it’s also not surprising,” author Dr Annamaria Lusardi told a podcast in 2022. “We might have the same income, we might have the same education, but if I invest in stocks and you don’t invest in stocks, 20 years later we might indeed look very different.”

This was echoed by respondents in Older People’s Voices, who were asked what advice they would give their younger selves. Their suggestions included “start learning about money when you are young,” and “be responsible for your own financial literacy”.

How assets can support you

The Older People’s Voices report found that those feeling comfortable in retirement tended to be disciplined and careful. They owned homes, saved money, and invested in KiwiSaver, property and other assets (and inheritances helped, too). As those disciplined savers know, the right investments can set you up for a high-quality retirement that includes travel, restaurant meals and plenty of treats for the grandchildren.

Income-producing assets can give you passive income – money that keeps flowing in even when you’re not working. This means investing in assets like shares (including via KiwiSaver), property, or a business. There are varying levels of risk in each approach, but the sooner you start the more time you have to recover if something goes wrong. Once you stop working, these assets can continue providing you an income, or you can sell them and use the profits to meet your costs.

Your home isn’t (usually) an income-producing asset, so you may need to work a little harder to make use of the equity you’ve built up over the years. You can turn your equity into cash by downsizing or borrowing against it – plan ahead and do your homework so you understand how and when these strategies can work.

“In our research, people told us they would like to downsize but they couldn’t find suitable properties,” says Dr Suzy Morrissey, director, policy and research, TAAO. “That generally means a property in the right area that is accessible. You might want a house that’s on one level, for instance. I live in Wellington, so here it might mean a house that doesn’t have 30 steps to the front door. Staying in the family home sounds nice from an asset perspective, but it’s not always the most appropriate place for older people.”

She adds that Kiwi retirees are often “asset rich, cash poor”, but home equity release products aren’t necessarily well-regarded by the public, even though they can be very useful in certain circumstances. While they won’t suit everyone, it’s worth finding out more about them to understand if they could be a way to fund the later years of retirement.

Doing nothing the biggest risk

Not sure how to get started on investing for your retirement? Ask yourself what you want your retirement to look like, says Lisa Dudson, financial expert and author of Good with Money. That’s the question Dudson asks her clients, and as long as the result is a realistic one, she uses the answer to come up with financial targets, then creates a road map to help put them on the right path.

“That gives you a rough plan, then you need to do regular check-ins where you re-check your numbers and what you want your lifestyle to look like – variables do come along so you need to be nimble.”

These days there’s a lot more flexibility in the way we can live and work, which can help you achieve the kind of lifestyle you want.

One of Dudson’s clients wanted to quit his job and spend more time travelling. After asking a few questions, Dudson suggested that instead of quitting his job, which he still enjoyed, he should negotiate with his employer to work remotely for four weeks a year. Along with his annual leave, that allowed him to keep earning a full-time salary while enjoying an enviable lifestyle of regular travel and adventure.

Whether you want to travel extensively, quit work and play golf full-time, or pay for your grandchildren’s education, the sooner you start planning the better. Talk to a financial adviser, boost your financial education, set your goals and get yourself on track.

“I meet a lot of people who have procrastinated for so long that they’ve done nothing for years, and they’ve missed out on a lot of opportunities to take advantage of the power of compounding over time,” says Dudson. “Unfortunately, a lot of people are immobilised by fear – but doing nothing is a huge risk. Don’t get yourself tied up in knots, just make a start. Anything is better than doing nothing.”

Close Look at the FIRE Movement

The FIRE movement – financial independence, retire early – has captured imaginations around the world. Why not retire when you’re in your thirties or forties? FIRE makes this possible: you live frugally for years, saving up a lump sum and investing it in such a way that you can live off the passive income. You never need to work again, although your spending will be tightly restricted.

Although retiring early can be a dream come true, life tends to get in the way of even the most impressively well-laid plans. One unnamed IT professional used the lean FIRE method to retire at 37 with US$950,000 in assets. He found that the first few years of reading, relaxing and travelling were brilliant. However, he was hit by two of the big three life shocks: his marriage broke down and he had health problems. With higher-than-expected costs, he re-entered the workforce five years later.

“Yeah, without my former partner I became depressed and anxious and again struggled with one of the great questions that terrorises us all: purpose,” he writes at LivingaFI.com. “I realised I needed more out of life. The discomfort; that growing sense of unhappiness, the creeping edges of depression just out of my direct line of sight as though it’s hiding in the periphery at all times. That discomfort did exactly what it was supposed to do. It prompted me to make some major changes that moved me in the right direction. As far as failures go, it was a good one.”

He met someone new and set about building a new life. He’s still financially independent, because his assets grew during those five years to US$1.3 million, but he’s working so he can support a higher-spending lifestyle and possibly children. It’s a great reminder that an important aspect of FIRE is the financial freedom to choose, not necessarily the ability to lie on the beach all day.

“All of my saving and investing in my 20s and 30s has positioned me to do whatever I wanted, more or less. It has given me freedom to make choices, exactly as I’d hoped it would all along.”

The Three Big Life Shocks

Even if you are currently heading for a comfortable retirement, major life events can change the direction.

“The three big life shocks are: a relationship breakdown, a serious health problem or disability, and redundancy,” Dr Suzy Morrissey says. “When someone has been on track for retirement and then they’ve been derailed, it’s usually by one of these.”

As much as possible you want to take care of your relationships and your health, but these big life shocks can still happen. It may be worth considering income insurance and health insurance, Morrissey suggests, to mitigate the financial impact of either of these problems.

A separation later in life can throw a spanner into all your financial plans. When home-owning couples separate and sell their house, there’s often not enough cash left over for both parties to each buy another house.

“When you go through a separation, you’ll probably engage a lawyer, but you should also think about engaging a financial adviser,” says Morrissey. “Think about the assets you’re taking, and which ones are appreciating assets, and what their value is, including your KiwiSaver, because that’s relationship property and it can be split in a separation.”