How to drawdown money in retirement

The Retirement Income Interest Group (RIIG) of the New Zealand Society of Actuaries has updated its four Rules of Thumb for engaging retirees thinking about drawing down their KiwiSaver and turning it into income, to reflect current investment and longevity prospects.

RIIG’s Rules of Thumb for KiwiSaver drawdown are:

1. Take 6% of the starting value of your retirement fund each year
2. Take 4% of the starting value of your retirement fund, then increase that amount each year with inflation
3. Run down your retirement fund over a period to a Fixed Date
4. Each year, take out the current value of your retirement fund divided by the average remaining life expectancy at that time

Each Rule gives different income amounts, for different lengths of time, with different risks and levels of certainty.  The idea is not to ‘set and forget’ one Rule to use for the rest of life, but instead to help people think through their own priorities and appreciate how much income is possible, with what risks and uncertainties.

Drawdown can start on one track and then switch if personal priorities or investment conditions change.  RIIG has been an advocate for Rules of Thumb being part of a drawdown framework to be offered consistently by KiwiSaver providers and advisers, which the Retirement Commissioner endorsed in her 2022 Review of Retirement Income policies.