Retirement planning: 4 questions to ask yourself

grandparents walking with granddaughter on beach

More than four out of five Kiwis believe that retirement is the start of something new, which is a good thing, considering that making any fresh start takes planning.

Retirement is our Third Act. It’s our time to try new things, do all the things we’ve never had time to do before, and generally, spend as much time as we want doing whatever we want, whenever we want.

By its very nature, that means that retirement doesn’t have to be planned out step by step, year by year. But it does mean that you at least need a general blueprint.

Understanding your retirement needs

From road trips to retirement, the first step of any new adventure requires knowing what you’ll need along the way. There are four broad questions to ask yourself to figure this one out.

Begin by asking yourself what kind of retirement you’d like. Will it be spent in a tiny house by your favourite beach doing nothing but reading books? Or is it travelling the world, visiting friends and family, and ticking off bucket list adventures?

Answering the first question will lead you to this second one: What’s it all going to cost? A tiny house might not cost too much, and that stack of books shouldn’t blow the budget either. Meanwhile a round-the-world ticket may burn a flaming hole through those retirement savings faster than you can say ‘all expenses included’.

Next question – how can you keep those costs under control? Selling a larger home you’ve been living in to downsize and fund your adventures is one option that many people consider (especially with the housing market making a beeline for the stratosphere at the moment), although setting a more realistic goal and stricter budget for those adventures is often the alternative route.

And finally, what kind of risk are you comfortable with? When setting a budget for your retirement, you might prefer to spend the first few years burning through your savings then live frugally afterwards, or you might have more of a slow-and-steady kind of personality.

How to plan for your superannuation strategy

Your superannuation strategy could be a way of getting the most out of the savings you already have, and maximising every cent you put in.

You may wish to look into any government schemes that can help boost your super. For example, if Kiwis put at least $1,042.86 in their Kiwisaver accounts in the year to June 30, the government will top that up by a little over $520. Every year.

Another potential option to consider is increasing the percentage of employee contributions you’re making through work before you retire. The default rate is 3%, but you can go as high as 10% if you wish, which means that 10% of your salary will go straight to your superannuation. A benefit here also is that it comes out of your pre-tax salary.

You can also chat to your Kiwisaver provider about ways to maximise your savings, so you can get the most out of your retirement fund.

Tips for creating a superannuation strategy

Look into any government schemes you can take advantage of
Consider increasing your salary contribution through your employer, if it fits within your personal needs
Speak to a financial advisor about your investment mix
Use a retirement planner calculator to see if you’re on track with your savings
Do a practice month of living off how much you expect to spend per month during retirement to test if it is difficult, realistic, or even more than you need
Consider asking your employer about flexible working options (such as working just two days a week for plenty of time off while retaining some income).

Look, nobody said planning for retirement was easy. There’s a lot to think about, especially when 81% of us would rather not think about how long they are going to live for (which is, in all honesty, a major factor in retirement planning). It will take a bit of time to wrap your head around, figure out a plan, and put it all into action.

Does your super give you adequate coverage?

Remember, it’s a good idea to ask questions. Your super fund may or may not have adequate life insurance provisions for you, so you might want to consider a life insurance policy to give your loved ones adequate protection if you were to pass away or be diagnosed with a terminal illness.

If your superannuation policy does include life insurance, here are some important things to check

Does it have an advance payout for immediate expenses like funeral costs?
Does it cover death by any cause including natural causes, or only death by accident?
How much will premiums cost now and in the future?

Seniors Term Life Insurance: the facts

A flexible cover amount that suits you. Choose how much you or your family will receive if you pass away or become terminally ill. You can set a benefit amount from $10,000 up to $100,000.
Cover for when you need it most. We know that the older you get, the more you have to protect. That’s why our cover is designed for people aged 45 to 79, protecting you and your family for the next 20 years or until you turn 85 – whichever comes first.
Immediate cover. Once your policy is set up, you’ll be covered straight away for death, and for terminal illness (excluding suicide for the first 13 months).
20% advance payout to cover funeral costs. When your family makes a claim, we’ll give them 20% of the benefit amount in advance, so they won’t have to worry about the cost of your funeral or other immediate expenses.

At least there is one thing that’s simple – life insurance It only takes a few minutes to get a quote, then you get set up monthly payments, knowing your loved ones will receive a lump sum if you were to pass away, taking some of the pressure off immediate bills due.

^{This article is an opinion only, provided for general information purposes and shouldn’t be considered or relied upon as professional or personal advice. If you have legal, tax, or financial questions, you should contact an appropriate professional.}

10 Apr 2022