Big gap between retirement expectations, reality as few older Kiwis plan ahead

New Zealanders' expectations and experience of retirement show a yawning gap between hopes and reality and little financial planning to achieve their goals, a new study has found.

Just over 1000 people responded in April to the survey commissioned by the Commission for Financial Capability and the Financial Markets Authority.

Almost half of respondents over 50 haven't yet figured out how they will reach their retirement goals, while 40% stopped working without a financial plan.

Only one in 10 people aged over 50 are certain they have sufficient money saved or invested to enjoy the lifestyle they want when they stop working. Of those already retired, a quarter said they don't have the money to do the things they'd like to.

Just over half of those nearing retirement said they had some sort of financial plan, though only a quarter were particularly thorough. Those with more robust plans were typically aged over 60 years and on higher incomes.

Only 42% have worked out the regular expenses they'd need to cover when retired and just 34% have calculated the additional income they'll need to top up NZ Superannuation to maintain their lifestyle.

Eight in 10 non-retirees plan to own their own home on retirement and, among those planning to rent or continue paying mortgages, 45% haven't calculated how much those payments will be.

CFFC general manager of investor capability David Boyle said the research shows too many people leave planning to the last minute, along with a big gap between expectations of those over 50 and the reality of what they'd need to fund their lifestyle.

"At 50 years old, when you have potentially 15 years to go before you stop working, there's still time to make a big difference to your lifestyle choices in retirement," he said.

About a quarter of retired respondents are just getting by and managing on the basics whereas retirees who had some formal plan for their retirement are more likely to be living the dream. About half say they can afford some spending on top of the basics.

Some 83% of those surveyed were risk averse on investments despite knowing higher risk equates to higher returns, and 71% said people should generally choose more conservative investments. Most retirees had their money in lower-risk investments such as a term deposit or savings account despite current low interest rates affecting returns.

Some have surprisingly high expectations for investment returns, with those aged over 50 generally viewing a 5% return as fairly low, 9% as medium, and 15% as fairly high. To put that in perspective, one-year bank term deposit rates are currently averaging under 4%.

Most nearing retirement have some savings or investments to supplement NZ Super but only 11% of those aged over 50 said they currently have sufficient accumulated to deliver the sort of lifestyle they want.

Around 2.5 million New Zealanders are currently in KiwiSaver and can opt to withdraw their savings on retirement.

Both the CFFC and FMA said that, with so many people accumulating wealth towards their retirement from KiwiSaver and other investments, it was critical to plan properly and make smarter investment choices to avoid losing what nest eggs they had.

(BusinessDesk)