The latest Retirement Expenditure Guidelines are out, and while it has been found that retirees may need much less than seven figures to live comfortably in retirement, many will still need to supplement their NZ Super to maintain a comfortable lifestyle.
According to 2024 research from Massey University’s Financial Education and Research Centre, a ‘no-frills’ retirement will cost around $500,000 in savings, while those wanting a more comfortable retirement with travel, dining out, and discretionary spending, may need upwards of $1 million—especially in bigger cities.
However, the key takeaway is that for most Kiwis, relying solely on NZ Super won’t be enough. Planning and supplementing with additional savings and investments – like KiwiSaver – will be essential to securing financial comfort in retirement.
The rising costs of retirement
The guidelines highlight that while inflation has slowed, the cost of living remains a key challenge for retirees. Housing, utilities, transport, and insurance costs continue to rise, making it even more crucial to have savings in place.
One of the biggest concerns for retirees is the "fear of running out" (FORO) – the anxiety that their savings won’t last their lifetime. Massey University’s report shows that many retirees are already adjusting their spending habits, cutting back to ensure their savings stretch further. As report author Associate Professor Claire Matthews puts it, “You can’t just sleepwalk into retirement, you’ve got to plan for it.”
What does retirement really cost?
The guidelines break down spending into two categories: ‘no frills’ (a basic standard of living) and ‘choices’ (a more comfortable lifestyle with some luxuries).
Here’s what a two-person household can expect to spend per week:
‘No frills’ retirement:
- Metropolitan: $909.90
- Provincial: $1,031.85
‘Choices’ retirement:
- Metropolitan: $1,739.85
- Provincial: $1,210.18
In comparison, the current NZ Super payment for a couple is only $799.18 per week after tax—meaning most retirees will need additional savings or investments to top up the shortfall to maintain their desired lifestyle.
If you're in a two-person household living in one of our city centres, you'll need to supplement your NZ Super with additional income sources, such as your KiwiSaver savings. The example below highlights the shortfall you’ll need to cover for either a 'no-frills' or 'choices' retirement.
Figure 1. Additional savings required for a two-person household to top up NZ Super for a ‘no-frills’ or ‘choices’ retirement.
Source: Massey University Financial Education Centre, as of 30 June 2024 (Metropolitan living costs).
How much do you need to save?
The updated research also provides insights into the lump sums needed on top of NZ Super to fund retirement. Interestingly, it highlights a slight decrease in the projected savings required compared to 2023 data, suggesting that many households have adjusted their spending habits in response to inflation.
No frills retirement:
- Metropolitan: $120,000
- Provincial: $252,000
‘Choices’ retirement:
- Metropolitan: $1,142,000
- Provincial: $446,000
While some people do manage on NZ Super alone, for most, these figures reinforce the importance of active saving and planning.
KiwiSaver: Your best friend for retirement savings
KiwiSaver is one of the easiest ways to build up your retirement nest egg. No matter if you’re just starting out in your career or getting close to retirement, checking in on your KiwiSaver settings can make a big difference. Even small tweaks, like increasing your contributions or choosing the right fund, can have a big impact over time.
What can you do today?
- Check your KiwiSaver settings to make sure you’re in the right fund for your goals.
- Bump up your contributions if you can—it’ll help your savings grow faster.
- Talk to a KiwiSaver adviser for advice on getting the most out of your KiwiSaver money.
Retirement is meant to be enjoyed, whether that means traveling, spending time with loved ones, or just living stress-free. The key is to start planning now.
How Aurora can help
We’re passionate about creating a healthier planet through our investing – but we’re just as committed to education, empowerment, and making KiwiSaver simple, accessible, and rewarding.
Want to make sure you're on track? Get in touch for a no-obligation chat with an Aurora KiwiSaver specialist about your KiwiSaver account and how it can help you build a comfortable retirement.
For more insights, check out the full Retirement Expenditure Guidelines here.
DISCLAIMER
This information is provided in a general nature only and should not be construed as or relied on as financial advice. This is not a recommendation to invest in a particular financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any investment decisions.