Most over 55s appear poorly prepared for retirement, KiwiSaver research shows

Both the over 55s and younger savers aged 18 to 24 are struggling with aspects of KiwiSaver.

The majority of Kiwis approaching retirement don't know how much they need to save for their golden years and of those who do know more than half say they are not on track to get there, research has revealed.

For the first time this year KiwiSaver providers had to tell members how much they would have in their KiwiSaver account by age 65 and what weekly income this could provide them until the age of 90.

The information was part of the annual statements released around May to June but it seems the numbers may yet to have sink in for many.

Research by Westpac has found just 44 per cent of those aged 55 to 64 know how much they need to save for a comfortable retirement.

And of those who did know just under half (49 per cent) said they were on track to get there.

Karen Silk, Westpac New Zealand customer experience hub general manager, said that meant only 22 per cent of those in the near to retirement age group knew how much they were going to need and believed they were on track to get there.

"That is a worry."

Silk said she didn't know why this level was so low.

"I'm not entirely sure because the information is out there. The communications are coming out to them. We are writing to them and outlining what their savings profile looks like and where they will be at that retirement age."

Silk also pointed to annual research out of Massey University which showed how much people needed to save for either a no frills retirement or a comfortable retirement.

Figures from the 2019 Massey Retirement Expenditure survey showed a couple living in a major city would need a lump sum of $787,000 to have a comfortable retirement provided they also had a mortgage-free house.

While those who lived a no-frills retirement would need a lump sum of $261,000. Singles would need $187,000 for a no-frills lifestyle and $764,000 for a comfortable lifestyle.

The research is based on actual spending by retirees.

"The message does not seem to be sinking in."

Silk believed the key to changing that was to continue to communicate with people on an individual basis.

"I think it is just continuing to find ways to build those avenues and connect with people at an individual level, it is the only way you are going to be able to do this."

Asked if some people just saw it as too hard Silk said: "I'm sure there are some people that are in that category."

"We all know there are people in the category where they are living hand to mouth every week - the ability to even think about saving when you are in that position is just impossible so there is definitely people that would fit into those groups which is why you have to have things like government superannuation."

But Silk said there was also a portion of the community that had the ability to save and did not understand where they were putting it or what their goal should be and how to work backwards from it.

"There is absolutely a group where there needs to be continued investment in building that literacy and giving them the tools to convert that and understand their personal circumstances and take control of it."

Both KiwiSaver providers' websites and the Government-backed Sorted website have calculators which show how much a person could have at retirement depending on how much they put in, which fund they are choose and what age they plan to retire.

Karen Silk, Westpac New Zealand customer experience hub general manager. Photo / Brett Phibbs

Across all age groups the survey found just 38 per cent knew how much they needed to save for retirement with males more likely to know (44 per cent) than females (33 per cent).

For those that knew how much to save 55 per cent said they were on track to get there with 64 per cent of males on track and 44 per cent of females.

The research also found a lack of knowledge about KiwiSaver among young people aged 18 to 24.

Nearly a quarter of that age group did not know which type of fund they were in compared to 14 per cent across all age groups. While 9 per cent of 18 to 24 years olds didn't know their balance compared to 5 per cent of all members.

Younger people were also more likely to be in a default fund and were less likely to say it was important to choose the right type of investment fund.

Silk said the findings for young people were not surprising.

"When you are at that age the reality is you should be thinking about being in a growth fund - having a much higher weighting towards equities than fixed interest, especially in an environment where negative interest rates are going to play out."

She said it showed many were not thinking about the time value of money, how saving from a young age meant taking advantage of compounding interest.

"It is just going to make it harder the older you get."

Many young people have lost their jobs in the wake of the Covid-19 lockdowns and face financially uncertain futures.

Silk said despite that it was important not to the let the pandemic consume everything in your life.

"Every dollar you are putting away is compounding growth over time and understanding that and not getting diverted by shorter term issues - Covid is a significant issue - but not getting diverted from that is the right thing as well."

Silk said while the sharemarket volatility caused by Covid-19 had been a wake-up call for many, its advice remained the same.

"All KiwiSaver members should base their investment decisions on what they're saving for, their timeframe for needing the money, and their tolerance for risk."