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Nest Egg Retirement Income - what, where, why, and how much? By Alan Clarke How much income do you need in retirement? Where will it come from? In my 25 years as an adviser I have seen some people live on very little and many others who can’t. From various sources I have come across over many years, and assuming ownership of a debt free home, I have developed the two following bases; - The income you will need to live very basically - The income you will need to live comfortably A “very basic” living standard would not include much fun, no alcohol, no dinners out, and limited travel. A “comfortable lifestyle” would include some travel, dinner out from time to time, owning a decent car and eating better food at home, etc. A single person living basically needs about $22,000 p.a. A single person living comfortably needs about $35,000 p.a. A couple living basically need about $33,000 p.a. A couple living comfortably need about $50,000 p.a.
Can you rely on government super? The general consensus is that people over 55 today will get Government Superannuation at 65. People age 45 to 55 today might have to wait until age 66, or 67, 68 or even 70. Those under 45 seem pretty much resigned to the assumption that Government Superannuation may not be there at all, or at least in a much lesser form. Who stops working at age 65 ? The actual age you retire will depend on many factors, such as your need for extra cash flow, your health, whether or not you like your work, the sense of self-worth you get from a productive job or running your own business, interaction with others, and many, many others. Many people over 65 are still working, and indications are that less than 50% need the money – they would rather be working. (From the author - my father lived to be 100, so there are some longevity issues for me to consider too!) Kiwisaver Kiwisaver is good for most of us, but it will not be enough unless you’ve started at a very young age. Other income sources Investments – any saving is good saving. Work - yes, many people over 65 work, but you cannot rely on your health to allow you to keep working forever. A small business, often at home, can generate some useful cash flow. Remedial teaching, consulting, doing locums, working part time for the people who bought your farm/business, giving a business owner a break, mentoring younger people starting out in business, and many others. Rent out your spare room. Convert your sleep-out into a rental flat (but watch the costs). Sell your house and buy two units (for the same price) and live in one and rent the other out. Go fruit picking in season, e.g. Kerikeri, Nelson, Alexandra/Roxburgh, Katikati, and Hawke’s Bay. Rent out your house and do live-in property management, house sitting, and/or travel for 6 to 12 months. Raising more cash Subdivide your property if possible. Eat your house - we have seen many people age 77 to 84 move to a smaller/cheaper house for many reasons, and this often releases some cash. In summary “Cash flow is king” before and after retirement. Any saving for retirement is good. Don’t be put off by the huge figures on Sorted.co.nz. Kiwisaver is good, but more saving would be better. Working past 65 can be good for your cash flow and your general disposition. Don’t rely on your health allowing you to work forever. Alan Clarke Alan Clarke is the author of a new book entitled “Retire Richer” - a practical guide for everyone age 25 to 85. Alan is an Authorised Financial Adviser (AFA) and his disclosure statement is available on request and free of charge |
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