What does retirement actually cost?

It's official - New Zealand Super will not be enough in retirement. Not really a new, or groundbreaking statement. On this episode of our podcast, one of the topics we covered was the latest findings from the Massey 2023 Retirement Expenditure Guidelines. The rising cost of living continues to be an issue, and the report shows the clear importance of saving and investing for your retirement. So what does retirement actually cost, and what's the gap between what the government provides and what you need?

The below table shows a number of scenarios and allows us to compare one-person households to two-person households, as well as compare the major cities (metro) to the provinces (provincial). It also shows the difference between a no-frills lifestyle, and a choices lifestyle, which relates to the standard of living you can expect in retirement. If you're reading this newsletter and listening to our podcast, it's probably fair to assume you're aiming for a choices retirement for yourself and your family.

The New Zealand Retirement Expenditure Guidelines as at 30th June 2023

Clearly there is a gap between what you can expect from the government, and what you will likely need. Even the no-frills two-person provisional budget falls almost $5,000 per year year short. On the other end of the spectrum, a choices two-person metro budget falls $46,915 per year short. That's a relatively decent gap to fill, especially if you consider the potential for a 30-year retirement, medical costs, and ongoing care at some point.

Another thing to keep in mind is that this is in today's dollars and based on the rules and legislation in effect today. How confident are we that NZ Super will still look like this in the future with an aging population and fewer taxpayers putting into the money pool? I for one don't want to leave my retirement needs in the hands of any government.