How much do I need to retire in NZ?

One of the questions I get all the time here at Opes Partners is, “OK, Andrew, be honest: how much do I need to retire?”

We estimate that if you retired today with the no-fills lifestyle, you'd need between 300,000 to 535,000 as a single person or $136,000 to $345,000 as a couple. That's if you want to live off the income your assets generate (passive income).

And if you’ve been thinking about retirement, you’ll probably know there is a huge range.

Some people want to spend more in retirement. Others are happy to live a more modest lifestyle.

It also depends on where you live. It costs more to live in a city compared to a small town.

So you might be saying, “How much should I spend in retirement? Can anyone just help me answer this question and give me a solid budget?”

That’s what you’ll get in this article.

You’re going to learn:

• how much you should aim to spend in retirement
• how much you’ll get from the government
• how much you need to save/invest

And by the end, you’ll have a great sense of what your retirement may look like.

More from Opes Partners:

• What happens if I don't invest? Retirement reality revealed (Podcast)
• What should my retirement plan look like? (Article)
• What's the size of your retirement gap? (Calculator)

How much should I spend when I retire

Are you happy living on a strict budget? Or would you rather spend a lot of time on overseas holidays?

These questions will determine how much you need to spend when you stop working.

To give you a sense of what’s possible, here are the 6 types of retirement investors often choose from:

NZ Superannuation – $24,000 - $40,000 a year

If you just want to live off the government pension, you can spend about $40,000 a year as a couple.

That’s what gets paid into your bank account.

Your budget will be very limited. According to Massey University research, you can spend about $17 a week on fruit and vegetables for two people.

If you are a single person, you don’t get as much. You’ll get around $24,000 a year to spend.

The vast majority of retirees spend more than what they get from the government.

So you probably want to aim for a better quality lifestyle.

No-frills lifestyle – $36,000 - $51,000 a year

In the no-frills lifestyle, you can spend around $50,000 a year for a couple.

Provided you have your own home with no debt, you can have the bare basics but no extras. You will have to be very careful with your money.

This is still a “below average” lifestyle. Over 60% of Kiwi’s who are 65+ spend more than this each year.

The exact amount you spend is based on where you live. It also depends if you’re single or a couple.

Here are the most recent figures for what it costs for the no-frills lifestyle:

NZ Super won’t cover all of these costs, so you’ll need to save or invest to fund some of this lifestyle yourself.

We estimate that if you retired today, you’d need:

• $300,000 – $535,000 as a single person
• $136,000 – $345,000 as a couple

This is if you want to live off the income your assets generate (passive income).

Choices lifestyle – $60,000 - $87,000 a year

Next, you have the Choices lifestyle.

Provided you have your own home and no debt, you should have a comfortable time. You can spend slightly more than the average retiree, but not much more.

You have more choices and can afford the odd holiday around New Zealand.

You will need extra money for large purchases. e.g. buying a campervan. And if you have any health troubles, you’ll need to go through the public health system.

Here are the most recent figures for what it costs for the Choices lifestyle:

NZ Super won’t cover all of these costs, so you’ll need to save or invest to fund some of this lifestyle yourself.

We estimate that if you retired today, you’d need:

• $1,150,000 – $1,360,000 as a single person
• $890,000 – $1,450,000 as a couple

This is if you want to live off the income your assets generate (passive income).

Well-off lifestyle – $100,000 a year

This level of income starts to give you many more choices.

The home you live in, the holidays you take. If you manage your money well, you can take more overseas holidays.

If you are used to living on a high income while you’re working, this allows you to continue your current lifestyle.

This is the lifestyle most investors I work with here at Opes Partners aim for.

Once we get to this lifestyles, we don’t break it down by relationship status or where you live. There’s enough income that you don’t have to worry about every dollar.

Again, you need to save or invest to fund some of this lifestyle yourself. NZ Super doesn’t cut it.

We estimate that if you retired today, you’d need:

• $2,640,000 as a single person
• $1,929,000 as a couple

This is if you want to live off the income your assets generate (passive income).

Why is there a big difference between singles and couples? If you’re living off the passive income your assets (savings) generate, you still need to pay taxes.

If you’re a couple, you’ll pay less in tax than a single person. That’s because you can split the income across two people. So, more of your income is taxed at a lower rate.

Affluent lifestyle – $150,000 a year

Once you move into the affluent lifestyle, you can enjoy a very high quality of life.

You can drive the car you want and travel where you want.

You have choices and can easily handle health concerns. You can pay for treatment if needed. If you want to go through a private hospital, you can do that.

You don’t have to wait for a doctor through the public system.

This lifestyle is achievable. 1 in 5 Kiwis over 65 spends more than $145K in retirement.

We estimate that if you retired today, you’d need:

• $4,580,000 as a single person
• $3,780,000 as a couple

This is on top of your NZ Super.

Contribution lifestyle – $200,000+ a year

Now, you have a very, very high-quality lifestyle, and you can support others. You can help the kids and grandchildren. You can donate to charities that are important to you.

We estimate that if you retired today, you’d need:

• $6,630,000 as a single person
• $5,640,000 as a couple

This is on top of your NZ Super.

Use this calculator to help you estimate whether your current savings plan will be sufficient enough to fund your retirement lifestyle you want:

Which lifestyle should I choose?

As you choose your lifestyle, you need to balance what you want with what’s achievable.

You might think, “Of course, I want to spend $200,000 a year.”

But if you have a big goal like that, you need to save and invest more today.

To invest more, you need to spend less.

So, there is a trade-off. A big lifestyle in the future could mean cutting back more today.

But the flip side is true, too.

If you spend all your money today (and don’t invest), you’ll have fewer choices in the future.

So, you need to balance what you want with how much you’re willing to invest.

Just keep in mind that superannuation does not cover even the most basic lifestyle.

So, paying off the mortgage and living on the pension is not a good retirement plan for most people.

That’s why you need assets that you can use to support yourself.

Examples

Here are a few case studies to show you the sort of lifestyles Kiwis are aiming for.

Tanya retires at 65 on $82,200 a year

I first met Tanya when setting up Opes Partners back in 2013. She already had two investment properties. She had owned these for a decade each.

She was 57 at the time with two teenage sons. She wanted to build a passive income and didn’t want to rely on the government pension.

Over the next few years I helped her buy 2 more investment properties.

In 2021, Tanya sold her 4 properties and bought 2 apartments without a mortgage.

Together, these rental properties earn her $1,500 a week before tax. Then, she gets the NZ Superannuation.

Once you factor that in, Tanya can spend $82,200 a year. That continues whether she lives to 82, 92 or 102.

Tanya is living the Choices lifestyle.

Bruce and Carol sell their properties to fund their lifestyle

Bruce and Carol took a different approach. When I met Bruce, he was 49, and Carol was 46.

We worked out that if they invested in 3 properties over the next 7 years, they could spend $57,000 a year in retirement. They would then have their superannuation, too.

By the time Bruce hit 65, the value of their properties had gone up, and they’d paid off a bit of debt.

So, they sold one of their properties and kept $57,000 in their account. That’s what they wanted to spend that year. They then invested the rest in a term deposit.

Every year, they’ll take another $57k out to spend and then reinvest the rest.

When they need more money, they’ll sell another one of their properties.

Bruce and Carol can spend $96,709 a year. That means that Bruce and Carol are close to the Well-off lifestyle.

How do I make a plan for my retirement?

We get it. These numbers are big. So you might be thinking … “How do I build up that level of assets?”

Well, the answer for most Kiwis is to start investing. You need to grow your assets and build your wealth.

One option many Kiwis consider is investing in property.

If you’re in the same boat, you might like to come to see us at Opes Partners, just like Tanya, Bruce and Carol.

We can create a free retirement plan using our in-house software, MyWealth Plan. That way, you’ll know how many properties you need to invest in.

We can then help you find the properties that suit your retirement plan.