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Retirement confidence drops

Retirement confidence drops as investors realise impact of inflation on their savings target

28 per cent of savers say they intend to increase KiwiSaver contributions to
reach their higher inflation-adjusted target

Only 39 per cent of those with a retirement savings target are confident of reaching their goals according to ANZ’s Retirement Savings Confidence Barometer, released today.

Confidence has fallen from a previous high score of 50 per cent in October 2013. The drop is due to the survey adjusting peoples’ savings targets for inflation for the first time.

“The impact of this change is significant,” said John Body, ANZ Wealth Managing

“A quarter of male respondents and 32 per cent of women said they would increase their KiwiSaver contributions now they could see the impact of inflation on their goals.

“The results show that many people have not factored inflation into their savings plans.

If you’ve got more than ten years before you retire, then you’ll need to think about how inflation will impact the buying power of your savings.”

Confidence fell most steeply among 25-44 year olds. Only 38 per cent were confident in today’s survey compared to 54 per cent in October 2013. People earning more than $100,000 a year are also less confident - down from 66 per cent to 50 per cent as the reality of inflation takes hold.

In previous surveys the respondents’ lump sum target was generated by asking how much additional weekly income they wanted, in today’s dollars, on top of the NZ Superannuation entitlement of $348 a week. From now on the weekly retirement income that people choose will be adjusted for inflation.

“What this means for a 30-year-old who is planning for a retirement income of $200 a week on top of NZ Super, is that the target they need to save toward will probably be double today’s money when they reach 65,” Mr Body said.

“The change to our survey provides a more realistic financial target for the retirement lifestyle people want to have. There are things people can do to compensate for inflation without necessarily lowering the amount they’d like to live on in retirement. People can increase their contribution rate or change their investment approach.”

ANZ calculates that a 30 year-old earning $50,000 a year, contributing 3 per cent of their salary into KiwiSaver using the life stages investment approach, could achieve about $340,000 in their account when they reach 65. This would deliver about $200 a week in 35 years’ time when adjusted for inflation.

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