Planning retirement

Stages of retirement

Retirement now looks very different to what we remember. You may never experience a sudden shift from full time work to full time retirement, and you may want to keep working or doing things you enjoy as you get older.
The Commission for Financial Capability (CFFC) uses the three stages of retirement to encourage people to think about ageing well and preparing for the future. These stages are broken down into; Discovery (around 65-74), Endeavour (around 75-84), and Reflection (85+).

The Discovery stage

In this stage, you may still be working part time or be self-employed. You may be interesting in doing all the things that you did not have time for when you worked full time, such as travelling, spending more time on your hobbies and interests, learning new skills, and visiting family. You may still be physically and mentally capable of leading a fairly active lifestyle. CFFC dubs this as the ‘doing’ years, and this may come with increased living costs as you explore what you can do in retirement. It is important to plan your expenses and savings to ensure you can enjoy this part of retirement and continue to be comfortable in the future.

The Endeavour stage

The middle stage of retirement may be a time where you focus on developing your skills or explore new ones. Having a routine may help manage your energy so you can maintain the activities you enjoy. It may be a good time to consider downsizing your house or to find ways to reduce home maintenance. Financially, you may still be pursuing hobbies and travel, but at a slower pace which will steady your expenditure. Many people in this stage consider releasing equity from their family home as they downsize to plan for future expenditure. At this stage, you may need to plan for future health issues and allocate savings for future health services.

The Reflection stage

In the later stages of retirement, you may need more help as your health and finances limit your personal independence and choice. Many people enjoy these years of retirement by spending time with loved ones, making memories, and reflecting on past memories. The cost of living at this stage may drop dramatically as you spend more time at home, but if your health declines this may rise rapidly. It is important to plan for future health needs, which may require family support, and government and community agency support.

Planning finances

The earlier you begin planning for retirement, the more prepared you will be when you do retire. The New Zealand Superannuation (NZ Super) payment for people over the age of 65 does help cover expenses in retirement but will most likely not be the amount that you want to spend in retirement. You will need other sources to supplement your income in retirement such as personal savings, KiwiSaver, investments, and assets.

Paying off debt

If you have debt such as from credit cards or a mortgage, you should aim to pay these off as quickly as possible. Entering retirement mortgage-free will free up your NZ Super payments and will give you a chance to build your savings before you retire. You can find more information about paying off mortgages before retirement at Sorted.

Working in retirement

There is no compulsory retirement age in New Zealand, and many people continue to work with flexible hours, part-time, or casual hours during their retirement. You can still receive NZ Super if you are over 65 and working or receiving an overseas pension. Some people choose to work because they need the extra money on top of NZ Super, or because they can and want to stay employed at an older age. You can find more information about receiving NZ Super and another income at Work and Income.

Equity release

If you own a property or other valuable asset, you may find a lot of your money is unusable. During retirement, many people consider selling their house and downsizing or moving into a more manageable property. This can free up some of your money to be used elsewhere. You can also consider getting a reverse mortgage on your house, which is when you borrow an amount of money against your property to be repaid when you sell the house or when you pass away. Applying for a reverse mortgage is a big decision that should be done with independent legal advice. You can find more information about there at Consumer. More information on releasing equity can be found at Sorted.

KiwiSaver and NZ Super

KiwiSaver is a voluntary savings scheme that helps you put money aside for retirement. You choose a percentage of your salary to be deducted and saved with a KiwiSaver scheme provider such as your bank. It is designed to help you save for retirement or to buy a first house. You can find out more about KiwiSaver on the IRD website.
NZ Super is a pension that people 65 and over can receive. You can still receive NZ Super if you are not retired, and it is not income tested. The NZ Super rate depends on your living situation, whether you are single or in a relationship, and whether you receive any other benefit. You can find the rates for NZ Super here, and general information about NZ Super can be found at Work and Income.

Retirement and savings planners

Sorted, which is the financial guidance service developed by the Commission for Financial Capability, has a retirement planner tool that can help you see if you are financially on track for the retirement lifestyle that you want. You can use this tool here. They also have a calculator to track your KiwiSaver contributions to plan ahead for retirement, which you can find here. You can find more tools for planning, budgeting, debt repayments, savings, and more on the Sorted website.

Websites of interest

  • Information on improving retirement and planning ahead can be found on the CFFC website
  • You can find pamphlets on Working After 65 and It’s Your Money and Your Choice on our resources page