Four ways to make your money last in retirement

How will you make your savings stretch in retirement? Photo / 123RF

New Zealand's best number crunchers have come up with four rules of thumb to help people stretch their savings out in retirement.

With people living longer there are growing concerns about how people will make their nest egg last until they die.

But the New Zealand Society of Actuaries has put forward a guidance plan to the government to assist Kiwis decide how much of their retirement savings to spend each year.

Andreas Gluyas, society president, said it had developed the rules specially for New Zealand's retirement environment.

"The rules are a guide to help retirees plan the level of income their savings can support, so they don't run out of money too soon or leave too much behind, in line with their personal priorities."

Gluyas said the rules were particularly designed for those with modest to moderate savings but could also be useful for those with more money tucked away.

The four rules

• The 6 per cent rule
Suits: People who want more money at the start of their retirement and are not concerned with leaving an inheritance
How it works: Each year take 6 per cent of your starting savings.

• The inflated 4 per cent rule
Suits: People worried about running out of money in retirement or who want to leave an inheritance.
How it works: Take 4 per cent of the starting value of your retirement savings, then increase that amount each year with inflation.

• The fixed date rule
Suits: People comfortable living with other income (like New Zealand Superannuation) after a set date. Those who want to maximise their income throughout life and don't want to leave an inheritance.
How it works: Run your retirement savings down over the period to a set date; each year take out the current value of your retirement savings divided by the number of years left to that date.

• The life expectancy rule
Suits: Those wanting to maximise income throughout life, not concerned with inheritance.
How it works: Each year take out the current value of your retirement savings divided by the average remaining life expectancy at that time.