Get Sorted: $401, the new number to know

Many of us will undoubtedly need more than $401 per week to live on. Photo / 123RF

What's NZ Super worth? Let's say you were aiming to generate $401 a week (the new NZ Super rate for individuals as of 1 April) for the next 30 years. How much money would you need in the bank?

Using Sorted's retirement planner, it looks to me like you'd need to have close to $450,000 in a balanced fund and draw it down entirely over those three decades (a net real return of 2.4 per cent). That's to spin off $401 each week.

The thing is, many of us will undoubtedly need more than $401 per week to live on, especially if we need to cover housing costs like rent, rates, insurance and maintenance.

Not to mention all the other activities we're hoping to knock off our bucket lists when we step back from full-time work.

We're fortunate to have NZ Super already in place, so we don't have to go looking for that first $450,000. We can focus on the amount we'll need on top of that.

Mind the gap

It's all about the gap. The gap between what you'll need and what you're on track to have. Nailing your retirement number gives you the time to achieve the lifestyle you're after.

Nowadays 60 per cent of people above 65 depend entirely or largely on NZ Super for their income. Forty per cent have virtually no other income. It keeps a lot of us out of hardship.

As a pension system, NZ Super is relatively inexpensive compared to others around the world. But because many more of us are living longer these days, it is becoming more difficult to sustain.

Many 65-year-old men can now expect to live until they're 90, and 65-year-old women until they're 94. In the future NZ Super could very well be paid out later than it is now or at a different amount.

The gap could widen.

How are you tracking in KiwiSaver?

For most of us, that gap will be filled by saving and investing. Like many things, the trick is to start early and start small. Those consistent savings, coupled with the compounding returns from investing, will be what it takes to bridge the gap. KiwiSaver can certainly help.

Estimate how much you'll have in KiwiSaver when you retire, which allows you to make decisions on whether you'd like to increase your contributions or change what type of fund you're in – to aim for even better results. (You can also try this chatbot for fun.)

I often fall into the trap of thinking that just because I'm in KiwiSaver, I'm set for life. But many of us will need other investments besides KiwiSaver to ensure our gap will definitely be filled.

Nail your own number

How far away is your retirement? How long does your money need to last? What's your target number above NZ Super?

Run your own retirement projections today, and play with the numbers a bit until you nail yours. It's the beginning of a plan.

Once you know, you'll find ways to hit your mark. And depending on where you're at in life, you'll have options when it comes to planning for the future.

- Get Sorted is written by Sorted's resident blogger, Tom Hartmann (@TomHartmannNZ). Check out the guides and tools from Sorted – brought to you by the Commission for Financial Capability – at sorted.org.nz.