Planning for Retirement: Key Considerations

Recent findings from the Financial Services Council (FSC) reveal an alarming truth about retirement readiness in New Zealand. Over half of New Zealanders (56%)—and an even larger proportion of Kiwi women (69%)—report feeling financially unprepared for retirement. These statistics highlight the urgent need to address retirement planning and expose a critical gap in financial preparedness nationwide.

With retirement needs varying significantly from person to person, driven by factors such as lifestyle expectations, timing, and personal circumstances, the challenge becomes even more complex. Yet, one aspect remains clear: using sophisticated scenario modelling and thorough financial planning is essential to understanding what “enough” looks like for your future. Only by addressing these factors can you approach your retirement years with clarity and confidence.

The Lifestyle Factor: Defining Your Retirement Vision

Determining how much is needed for retirement is not simply about reaching a magic number – it’s about understanding your personal goals, lifestyle aspirations, and potential challenges that could arise along the way. Your retirement vision will significantly influence the amount of savings required to support you during retirement.

Outlined below are key lifestyle factors to consider when creating a retirement plan:

1. How Much Do You Have Now? Assess your current savings, investments, and any other assets. This includes managed funds, KiwiSaver, shares, bank accounts, property, and other investments. Knowing your starting point helps you determine how much more you need to save.
2. How Much Do You Spend Now? Understanding your current spending habits is crucial. Track your monthly expenses, including housing, utilities, groceries, transportation, healthcare, entertainment, and other regular costs. This will give you a clear picture of how much you need to maintain your lifestyle.
3. How Much Can You Save Now? Evaluate your ability to save based on your income, expenses, and financial commitments. Setting a realistic savings goal and consistently contributing to your retirement fund is essential. Consider automating your savings to ensure regular contributions.
4. How Long Before Retirement? The time you have until retirement affects how aggressively you need to save and invest. The earlier you start, the more time your investments have to grow. Also consider whether you plan to leverage assets eg. Downsizing or sale of a property, receipt of an inheritance, or the sale of a business.
5. How Long Will You Be Retired? The length of your retirement depends on when you plan to retire and your life expectancy. On average, people are living longer, which means you might need to plan for a retirement that lasts 20-30 years or more.
6. How Much Will You Spend in Retirement? Spending patterns may change as you transition through different phases of retirement.  Many retirees experience higher costs in the early years, driven by travel and leisure activities.  These early expenses are frequently followed by increased healthcare costs in later years, highlighting the need for a retirement plan that evolves with your lifestyle and circumstances.
7. Is a Legacy Important to You? Lastly, you need to consider whether you want to leave an inheritance for your family or donate to charity. This can impact how much you need to save and how you manage your assets.

An online calculator could be a good starting point for estimating the savings and investments required for your retirement, such as the one offered by Sorted. However, these tools should be used as a complement to, not a substitute for, comprehensive financial planning with a professional adviser.

At Rutherford Rede, advisers utilise flexible models that allow our clients to visualise the trade-offs between current spending, future financial security, and legacy aspirations.

The Impact of Inflation & Economic Uncertainties

Inflation and economic uncertainties can undermine retirement plans. While accumulating savings is crucial, maintaining their purchasing power over time is the real challenge.

Inflation gradually erodes savings’ value. For example, with a 3% annual inflation rate, living costs could double in 24 years. This means $50,000 today might be worth $100,000 in the future, impacting financial security.

To counteract inflation, include growth-oriented investments in your retirement plan, not just fixed-income assets. This helps ensure savings grow at a rate that keeps pace with inflation.

Economic uncertainties also need consideration. Preparing for various scenarios builds resilience into financial strategies. At Rutherford Rede, we conduct scenario analyses to help clients make informed decisions and create adaptable retirement plans that sustain their desired lifestyle.

Risk Tolerance: Aligning Your Investments with Your Comfort Level

Lastly, your risk tolerance is crucial in determining the most suitable investment strategy for retirement. It reflects your ability and willingness to endure fluctuations in your investments’ value. Some may pursue higher returns through equities, while others may prioritize fixed-income investments. Generally, the closer you are to retirement, the more conservative your investments should be to protect your savings from market volatility.

Rutherford Rede’s Approach

At Rutherford Rede, we recognize that no two retirement journeys are the same. Our client-centric approach provides tailored solutions as unique as the individuals we serve. Our financial advisers craft bespoke retirement plans that factor in your specific goals, lifestyle aspirations, and potential challenges. We leverage advanced financial strategies and tools to ensure your retirement plan evolves with changing circumstances, offering both security and flexibility.

To start building a robust and adaptable financial plan, schedule a consultation with one of our experienced advisers. At Rutherford Rede, we don’t just provide answers to “How much is enough?”—we partner with you to navigate the complexities of retirement planning and create a dynamic strategy that evolves with you every step of the way.