imageWhen I asked someone that question today, they instantly responded with ‘Hell No’ – and I suspect you are thinking the same thing.

The shocking truth about this amount is that it is what you can expect to receive today if you are single and are at retirement age… Yes, that really is it, after all the years you have worked and the contribution you have made. If you are married and both at retirement age, you could expect to receive the sum of $288.10 each. A total of $576.20 per week!

So, what can you do about it? If you are sitting there reading this and thinking ‘I couldn’t survive on that amount’ (as most of us will be doing) then there are some things you can implement now to ensure your retirement is not one of downsizing your car and home, cutting out holidays and outings and even, perhaps, stopping your gym membership and regular beauty treatments and shopping trips.

No-one expects to dramatically change their lifestyle as they get older – rather, you want to do more as children leave home and there is more freedom to chase some of those dreams you have had for a while.

Westpac Massey University Fin-Ed Centre in conjunction with Workplace Savings has released its latest calculations on how much people currently spend in retirement. It revealed only couples who live in New Zealand’s major cities on a “no-frills” budget are able to get by on New Zealand Superannuation alone and an Auckland couple would need to have a combined $552,000 in their savings to have some choices in their retirement.

This is where KiwiSaver comes in – yes, we are going to have that conversation! You may know that saving in a superannuation scheme is compulsory in Australia and, while that is not the case here in New Zealand at the moment, it may well change in the future. In the meantime however, it is important to understand why KiwiSaver is such a good idea and, more importantly, what you can do to ensure you have a nice nest egg available when you do decide to retire.

Currently about one out of three people who have joined KiwiSaver have no idea who their provider is. Many simply enrolled through work and have been placed in a default system and roughly only two out of ten people have ever received any real advice. Not only that, but the government currently contributes a sum of approximately $521.43 of tax credits (depending upon your contributions) to your fund each year, and we know that some $400 million available to taxpayers was left on the table last year, indicating the number of people who still either have not joined KiwiSaver or do not contribute on a regular basis, having largely ignored the opportunity.

Having presumably agreed that we could not live on the amounts stated above, what does all this mean to your retirement fund and what can you do about it?

The average New Zealander could be losing hundreds of thousands of dollars by not managing their KiwiSaver accounts properly, according to leading financial consultancy firm KPMG.

Even worse, young people, who stand to benefit most from KiwiSaver, are not learning from the financial literacy shortcomings of preceding generations and stand to lose the most, according to John Kensington, KPMG’s Head of Financial Services.

Many New Zealanders do not realise the true benefits of contributing to KiwiSaver on a regular basis, investing in growth funds other than through a default system (or conservative fund) and thereby gaining the benefits of a very comfortable retirement.

For example, a female aged 30 years with a salary of $55,000, after contributing to KiwiSaver for a period of 35 years and investing her money in a conservative fund would expect to receive some $325,000 upon retirement. However, if she invested into a growth sector she could expect to double her money – a potential difference of many hundreds of thousands of dollars. (Calculated and based on a 5 year average sector return per annum on sorted.org.nz)

There are a number of other reasons why it is important to get some advice around your KiwiSaver investment – e.g. if you are unaware of your Prescribed Investor Rate, then you could be paying too much tax on your KiwiSaver returns.

In conclusion, a recent survey found people’s confidence in their ability to meet their retirement income goals had dipped somewhat – surely, on its own, a good enough reason to review your KiwiSaver and ensure you get the best return you can for your investment.

‘We’re all living longer and young people today may need their retirement savings to last for 30 years or more, so it’s vital that you have a plan to both save enough and make good use of the money you’ve saved’. John Body ANZ Wealth

If you have concerns about how your KiwiSaver fund is performing, or have never received any advice, it is important to have that conversation sooner rather than later – VitalSure are Registered Financial Advisers and can explain the benefits of KiwiSaver and help with a risk profile to work out what might be a suitable fund for someone in your age group and life situation. Call us now to make a time to meet up. A full disclosure document is available upon request.