The more data that emerges around Kiwis approaching retirement, the clearer it becomes that people are financially unprepared for their later years.

Superannuation pays a little more than $25,000 per year for an individual, and less per person for couples. There’s a common rule of thumb that a retiree needs to replace around 80 per cent of their working income in order to maintain their lifestyle. For most Kiwis, the pension isn’t enough on its own.

According to a 2023 Massey University study, a single person retiring at the age of 65, assuming they live until 95, will spend around $1m to $1.2m just to be able to afford a simple retirement lifestyle, and closer to $2m if they want to be more comfortable. 

So how are we doing? Generally speaking, not very well.

KiwiSaver
KiwiSaver is the most common tool people use to save for retirement. However, a quick look at reported KiwiSaver balances shows the average person could run out of money very quickly if that’s all they have to rely on.

According to a 2024 MJW report released in conjunction with the Retirement Commission, the average KiwiSaver balance for someone aged 66-70 was $58,125. This is around double the 2024 average KiwiSaver balance of $33,514, as reported by the FMA.

The New Zealand Policy Research Institute says more than 60% of contributing KiwiSaver members contribute the default minimum rate of 3%. More than 80% contribute 3% or 4%.

Some commentators believe the default rate needs to increase, as KiwiSaver account holders often fall short of the required balances needed to see them through their retirement years.

“Defaults are extremely powerful things, and when you set them at 3%, basically you’re sending a message to the entire country that that’s going to be enough, that’s going to do the trick. And we know that’s not the case for at least a certain percentage,” Retirement Commission Personal Finance Lead Tom Hartmann is quoted as saying.

Other investments

Many New Zealanders have more than just KiwiSaver to rely on in retirement. 

A Massey University study in 2019 found more than 60% of retirees earned interest from a savings account or term deposit. Almost 30% received dividends from shares, and a smaller proportion of others derived income from other means. 

Around 16% earned no other income, and slightly more were still working, albeit less than full time.

Plainly, for many Kiwis, a comfortable retirement is one that is supported by other income streams. This typically requires retirees to have planned ahead and invested enough during their working years. 

Start now

It appears however many Kiwis will have insufficient income to maintain their pre-retirement lifestyle once they hit 65.

While it can be a complex picture, there is one technique can go a long way to rectifying it: start investing for retirement sooner.

Personal circumstances are important and the right amount will be different for everyone, but Invest Now crunched the numbers, and by setting aside just $4,000 a year, based on a return of 7% (after fees and tax) each year, someone that starts investing for retirement at 20 would have a $735,000 larger nest egg than someone who invests the same amount, but starts at 40.

The sooner you start investing - in KiwiSaver or anything else - the more time that investment has to grow, and the more returns it can generate. It allows more time for compound interest returns to pile up, which is where your wealth can really multiply.

It’s not that you need to invest greater amounts, but by starting sooner, even with small, regular amounts, you can set yourself up to be more comfortable in your retirement.

However you do it, the best thing you can do is start. 

Top tip:
“Automate as much of your saving and investing as possible – for many people a ‘set and forget’ type approach to squirrelling money away for retirement is the best way to make consistent progress towards building that nest egg. That’s where initiatives like KiwiSaver and InvestNow’s Regular Investment Plans, which enables money to be invested automatically and at regular intervals, can be key in setting you up for success.” – Jason Choy, InvestNow Senior Portfolio Manager

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