Cathy Myers, the Business Development Manager for ANZ Investments talks about retirement and tips you can adopt to rest easy during this stage of the life cycle,
Will I have enough to retire at 65? Can I quit work feeling secure that my money will last? Or will I run out of money before I run out of life? These are the burning questions we all have to face at some stage.
Sitting down with a financial adviser, for a fee, will enable you to come up with some pretty accurate figures. I can't over-emphasize the value of a good adviser. However, there's a number of easy gauges some people adopt to work out whether they're on track or not. The following are a few of them, but they each assume you retain your capital and only live off the income your capital produces.
1. Multiply your final salary: It's been suggested that savers have 1 times their salary saved at age 35, and 2 times at 40, 3 times at 45, and so on in increments up to age 60. So by the age of 60 you should have 6 times your salary tucked away.
2. Subtract $1 million from New Zealand Superannuation: Currently a couple in retirement in New Zealand will receive just under $30,000 per annum net ($576.20 per week). If you need more than that, then consider that $1 million conservatively invested should generate around $40,000. That would give you $70,000 income in retirement. If you don't need that much - if you could comfortably live on say $50,000 in retirement - then you'll need $500,000 invested when you retire. As I said earlier, this assumes you don't wish to erode capital, but an adviser will be able to help you work out how much you can comfortably drag from your investment either safely drawing down capital or not, to ensure you don't run out of funds before you run out of life.
3. Make sure your investments perform: A well-invested portfolio is likely to double in value every 10 years or so. If your plan is to get to $1 million, then you will need $500,000 about a decade before your retirement target which means having $250,000 about two decades before your target retirement age, and so on. A 7.2% annualised return will do that, if you can sustain it year in and year out. Talk to an adviser about whether this is achievable.