Retirement: Don't leave it too late

How do you want to spend your retirement - travelling, spoiling your grandchildren or spending more time in the garden and on the golf course?
Whatever your ideal retirement is, it will come at a cost. But a recent Retirement Commission survey found that more than eight out of 10 people aged 45 to 59 had no idea of the value of superannuation payments and nearly half had not calculated how much they needed to save for the retirement they wanted.
Retirement Commissioner Diana Crossan says this lack of knowledge shows people are not thinking enough about how they will manage when they stop working.
"This group is not very far from retirement, yet a large number didn't have a financial plan or any knowledge of how much money they would receive on NZ Super."
About 40 per cent of today's retired people live on super alone - $333 for a single person living alone and $511 a week for couples. By 2021, one in five New Zealanders will be 65 or more and Ms Crossnan says people need to start preparing themselves financially. "Most of us look forward to our retirement because we see it as a time to enjoy the things we love. But to make the most of it you need all the facts and a plan."
Institute of Financial Advisers president Nigel Tait says it is never too late to begin saving, but the earlier you start the better.
"The best time to start is before you learn how to spend your income. If you put that 2 per cent aside from your first pay packet you have never had it so you will not miss it."
Getting good advice on retirement planning, and getting it early, is the key to a financially better end to work.
"Everyone should talk to a financial adviser - people don't know what it is they don't know about retirement planning. You have to have a clear understanding as to where you are now and start setting objectives."
Many people come to see him saying: "I want to have $1 million by the time I retire."
"But they have no idea why that amount or where it is going to come from. And, because it is so unrealistic, people tend not to stick to it."
Mr Tate says a proper analysis needs to be done to estimate each person's retirement expenses - how much they will need to live on once the mortgage is paid and the children have left - to set realistic savings goals.
He strongly recommends joining KiwiSaver, whatever your age.
"It is the very best place to start - there is not a lot around that will match it in terms of returns."
Because employers and the Government match the individual's contributions, Mr Tate says the money in effect earns 200 per cent before it is even invested.
"Even if you don't do anything else, if you start that from your first day at work you should just about be right."
But even with KiwiSaver, he emphasises the need to sit down with an adviser and make sure your plan is the right one for you and for your needs - reviewing it regularly to keep up with changes in your life.
Continuing to save in your 30s and 40s can be difficult, with mortgages to pay and families to support.
Mr Tate says it is important to maintain a balance between debt reduction and savings to give more long-term flexibility.
"It is important you don't leave retirement planning and saving until you have finished paying off the mortgage, as most people will have four or five mortgages over their lifetimes as they upgrade or upsize."
Retirement planning tips

* Make a plan and review it regularly
* Review your plan at least every two years or whenever your financial circumstances change.
* Involve your family
* They'll be affected by your decisions and will be able to offer knowledge and support.
* Do a budget
* You need to know how much your retirement is going to cost and where your income will come from.
* Think about when you hope to retire and how many years you are likely to have to support yourself.
* Consider the lifestyle you want and how much that will cost and where your home fits in your retirement plan. Once you have estimated your costs, work out what income you can expect from NZ Super and from private savings and perhaps rental properties.
* Then you can calculate
how much you need to save and it will enable you to set savings goals.  -
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