Retirement savings targets could be overblown

Retirees’ spending tends to slow as they age which should challenge some assumptions about the need for an intimidatingly-large sized pot of retirement savings, according to the New Zealand Society of Actuaries.

“We've looked at the numbers and said it looks like typically, a New Zealand household would reduce their spending in retirement by around 2% a year in real terms,” says Alison O’Connell, lead author of the society’s Retirement Income Interest Group’s latest research on spending in retirement.

“So what that means is that if general inflation is running at 2% a year, one would cancel the other out, and they'd be spending about the same in dollar terms as they go through.”

The latest retirement spending report from Massey University and Financial Advice New Zealand calculates that at the low end, a one-person “no frills” household in the provinces may need as little as $48,000 savings while at the higher end, a two-person household wanting “choices” in retirement may need as much as $1,142,000.