Low interest rates and higher inflation demand new retirement income strategies, according to leading financial services expert Ralph Stewart.
He says the days of living off returns alone, or drawing down a fixed percentage each year (sometimes called the four per cent rule), simply won't work anymore.
And, says Stewart, income projections by KiwiSaver providers may well prove to be "basic and misleading" for many of today's retirement savers.
"Under New Zealand regulation KiwiSaver providers are required to provide their customers with a simplistic retirement income projection based on a single investment return, single tax rate and the assumption all New Zealanders have the same life expectancy of age 90," he says.
"Calculating a reliable retirement income that will last a lifetime is deeply personal and anything but static or linear. Every saver in retirement deserves a dynamic personal projection that identifies their individual circumstances – and this in turn should be regularly reviewed and recalculated to maintain accuracy and relevance."
Stewart, managing director of Lifetime Retirement Income and a former CEO of AXA Insurance and ACC, says his company has set out to help retirees do just this through a retirement income fund specifically built for those in retirement who need to convert their savings into a reliable retirement income.
"We provide a safe haven that helps retirees determine a safe level of capital to draw down," he says. "We then manage the income levels to keep pace with the individual (or couples) age profile as they move through the retirement phase of life."
Stewart's views are echoed by Liz Koh, director of Enrich Retirement and one of New Zealand's leading retirement income specialists. She says one of the biggest challenges for retirees is how to plan the use of their retirement nest egg.
"Accumulating savings and investments during your working life is hard work. It requires discipline and sacrifice to set aside funds for later in life and there is a sense of immense relief in getting to retirement with a decent lump sum set aside.
"What I really like about Lifetime is that they understand retirees," she says. "They know that managing your investments to spend in retirement is different to saving for retirement. It requires different strategies."
Stewart says the saving industry manages assets to support the accumulation of savings while working whereas the retirement income industry does the opposite. "It helps retirees spend their savings over their retirement lives with confidence and it's time to recognise the difference.
"The difference between saving for retirement and spending in retirement - and understanding this - becomes all important as the migration of people out of the workforce and into retirement gathers momentum.
"At Lifetime we have an affinity and passion for developing transparent, low-cost, high value retirement income solutions that New Zealand retirees can have confidence in."
To talk with a Lifetime Income Specialist phone 0800 254 338 or email retire@lifetimeincome.co.nz
Lifetime Asset Management is the issuer and manager of the Lifetime Retirement Income Fund. Go to lifetimeincome.co.nz to view the product disclosure statement.