Saving for retirement? Try these 4 great investment tips
Posted June 2017 by Melissa Abraham-Smith
Retirement should be an exciting time in any Kiwi’s life, but with the cost of living on the rise, and the retirement age set to rise with it, it can be difficult to save enough for your retirement during your most productive years.
While most Kiwis past the age of 65 are eligible for Superannuation, according to the Commission for Financial Capability there’s “an increasing gap between the standard of living that we aspire to when we retire, and the standard of living we can afford on New Zealand Superannuation.”
When it comes to making up the difference, additional income will need to come from what's left in your back pocket or savings accounts, as well as any investments that you might have. Let's face it, the last thing you want to have to do is have someone lend you money or rack up costly debts just to make ends meet, right?
We think every hard-working Kiwi deserves peace of mind during their retirement, so read on for some quick and easy things you can do to help boost your retirement savings, invest in your future, and live as good a financial life tomorrow as you do today.
Up first? Let’s get serious and start setting some goals…
1. Create a plan and set yourself a goal
As with any decision involving money, having a plan and a set of goals to work towards is the quickest, simplest way to place yourself on the path to a future of financial freedom. That is, you need to know how much you’re going to need to save, and how you’re going to save it.
Simply making an educated guess won’t do you much good. You’ll be surprised at just how off your guess might be! Instead, sit down with a calculator and start running the numbers. When doing so, consider the following questions:
- What will your living costs be for things like food and utility bills, as well as those little extras like movie tickets or days out?
- Will you be renting, paying back a home loan, or do you plan to downsize later in life?
- Is there anything you’d like to do in retirement, like take up a hobby?
- Are there any extras you have on your bucket list, like travelling the world or renovating your home?
- Will you have any remaining debts to repay?
So, what kind of figure are we talking here? In a 2013 Horizon Poll, it was found that some 53% of Kiwis wanted a weekly income of up to $300 per week, in addition to their superannuation payments.
This is why it's crucial that you add up all of your expenses, added extras, and retirement dreams and find out what that final figure actually looks like.
2. Start saving early
According to the New Zealand Commissioner for Financial Literacy, you “need savings of about $205,000” for a 25 year retirement to supplement any superannuation payments. The New Zealand Financial Services council, however, isn’t as optimistic. They estimate you’ll need something closer to $300,000 to $450,000 just to maintain your current quality of life.
This isn’t the kind of cash you find down the back of the sofa or in your jean pockets, so you’re going to need some time to get this money together. Especially with credit card debts and other expenses taking a bite out of what little extra cash you're likely to have sitting around at the end of the month.
It follows that the more time you have to save, the more money you’ll be able to put away, which is why you need to start saving as early as possible. The more you save, the better quality of life you'll be able to lead when you have the time, and freedom, to do so.
Sure, current-day you might find it a bit difficult, but future you will thank you for it.
If you find yourself approaching retirement age without two cents in savings to rub together, don’t despair. In fact, it’s never too late to start setting some money aside. While starting young is the best option, starting today is always the next best thing. So whether you’re 25, 35, or 55, investing or saving your money now ensures you can maximise your savings and truly invest in your future.
3. Contribute to your Kiwisaver
By now you’re probably familiar with KiwiSaver: the voluntary saving scheme designed to help New Zealanders save much-needed cash for retirement. But while you might know it exists, many Kiwis tend to take it for granted or end up tossing it in the ‘soon’ pile and never get around to opening an account.
If you’re one of them? Then you’re throwing away free money each and every year!
KiwiSaver offers a number of incentives to get you saving that are just too good not to take advantage of. For example, the Government's member tax credit sees them making an annual contribution of $521.43 so long as your yearly contributions hit at least $1042.86.
It might not be the only savings or investment option you use, but Kiwisaver is definitely one of the easiest to get up and running. Free money? You won’t find a better offer to start saving for your retirement than that.
4. Apply for a term deposit investment
KiwiSaver offers a great way to tap into free cash on offer from the New Zealand government, but there’s also a number of other savings accounts and investment options available that can help you supercharge your retirement savings.
Savings accounts are one popular option, but if you’re looking to really put your cash to work, then a term deposit investment might be what you’re looking for. If you're curious which might work best for you, then check out our post on "Term deposits vs savings accounts. Which is best?".
Long story short, a fixed-term deposit works a little differently to how a savings account works, seeing you lock away your savings for a set period and earning a high-interest rate for doing so. While you can’t access the money during the term, you do get the benefit of a guaranteed return on your investment with the peace of mind of a fixed rate. This provides you with a great return on your investment without the added risks of other, more volative investment options like shares or the variable, fluctuating rate of a regular savings account.
Now’s the time to invest in your future
Whether you’re just taking your first steps into working life or taking the final few to the finish line, it’s never too late to start investing in your future and setting yourself up for the post-retirement life you’d like to lead.
By running the numbers, setting up a plan, and making the most of the free cash and great investment options on offer, you’ll be able to quickly and easily ensure your retirement years are spent enjoying life, and not worrying about where the cash is going to come from.
Your ability to live your best financial life shouldn’t stop when you retire, so go on and live it!