Call for consistent retirement savings target guidelines

Advisers say their clients welcome having a benchmark savings target to aim for in retirement – but the industry would be better served if there was a consensus view.

Friday, July 7th 2017, 6:00AM

by Susan Edmunds

Massey University has released its latest Retirement Expenditure Guidelines, which show the cost of housing and household utilities are an increasing cost burden on retirees.

The researchers estimated someone in Auckland, Wellington or Christchurch would need to save at least $101,744, on top of the pension, to cover a basic, no-frills level of spending.

The amount needed for a "choices" lifestyle in a city would be $360,620. Couples have it slightly easier. A "choices" city lifestyle would require a combined total of $486,023, or $243,011 each.

Financial adviser Liz Koh said that was in line with what she told clients. “People want to know, they have no idea. This sort of information needs to be spread more widely.”

But she said there were too many different estimates circulated about what was required.

“Someone was saying everyone needed $1 million and that’s just nonsense. People think ‘I’m never going to get to $1m, I’m stuffed, what am I going to do’. There needs to be an objective, universal guide that is a source people can rely on that ‘if you’ve got this you’ll be okay’.”

There is significant discrepancy between the guides available to consumers: Kiwi Wealth’s Future You calculator estimates that someone needs to save $802,000 to have a flexible retirement, and $431,200 to have a basic retirement. But it includes an assumption that retirees will still pay rent.

ANZ’s calculator says, for someone who wants to be able to spend $750 a week on a choices lifestyle, they need to save $325,000, on top of super.

Sorted estimates that $210,000 saved would be enough to give an extra $200 on top of the pension, which is $827.20 a fortnight for a single person, before tax.

Financial adviser and president of the IFA Michael Dowling said clients wanted to understand what saving for retirement would mean, and have some external validation of what was needed.

He said he would refer clients to Massey’s work where necessary. “The majority of clients who are looking for advisers’ help are targeted having more than [$100,000]," he said.

Tags: ANZ financial advisers IFA Massey University\ retirement