Information About Saving

Saving for my future

A message from Diana Crossan, Retirement Commissioner

One of the easiest ways to save for your retirement is through the workplace. If you can join a workplace superannuation scheme, which your employer contributes to – even better! Check out KiwiSaver. The government offers a range of incentives for you to join (or a complying superannuation fund). These incentives are summarised as follows: 

Benefit	KiwiSaver	Complying Fund
KickStart ($1000 on joining)	ü
Fee Subsidy ($40 per annum)	ü
Member Tax Credit ($1040 max. per annum)	ü	ü
Compulsory Employer Contributions (CEC) Currently 1% rising to 4% by April 2011	ü	ü
Employer Tax Credit (ETC) (claimed by your employer)	ü	ü

 

So seriously think about investing in a workplace saving scheme, either KiwiSaver or any other scheme offered by your employer. But like any investment, check it out to make sure it is right for you. Remember, any saving you do now could give you more choice and flexibility later in life.

How much should I save?

For most people, there will be a gap between the annual income that New Zealand Superannuation provides, and the income they want in retirement. Generally, their retirement savings must fill this gap.

The amount of money you'll need in retirement will depend on several things including:

• The size of any future State pension you’re entitled to. Currently, the NZ Superannuation paid to a couple (who are both superannuitants) is about $22,870 a year after-tax – equivalent to about two-thirds of the after-tax average wage. Single retirees get about $14,865 – about 40% of the after-tax average wage. (These figures are updated annually on 1 April. Budget 08’ tax changes will increase the amount payable on Oct 1 2008 also).
•  The lifestyle you want to have. To maintain their current lifestyle, some people aim to have about 70% of what their income was before they retired. Compare this figure with what you might get from NZ Superannuation.
• How many years you will have in retirement. On average, 65-year-old men can expect to live until they’re 81, and 65-year-old women until they're 84. By 2031, those ages are expected to rise to 84 and 87 respectively. So if you plan to retire at 65 you need to save to provide income for, on average, about 20 years.
• Whether you aim to own your own home or rent when you retire. This will affect your expenses in retirement and your options for raising extra money (e.g. unlocking the equity in your home).
• Whether you have a partner. This will affect your income from NZ Superannuation, your expenses and, possibly, the level of savings you need.

To get an idea of what you need to save visit the Sorted website (www.sorted.org.nz/) and do the Quick Retirement calculator. This calculator shows how much you (with the help of your employer) need to put aside each month to have a retirement income equivalent to 70% of what you earn now.

To assess what KiwiSaver will cost you each pay and how much you might save go to Quick KiwiSaver calculator.

The information in this section has been supplied by the Retirement Commission. The State Services Commission accordingly takes no responsibility for the information in this section.