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Retirement planning is a challenge, regardless of time

The vast majority of people believe they need to save more for retirement

• Views on the amount of money required each year for retirement vary widely

• The part that KiwiSaver plays in the retirement savings puzzle varies, but the majority plan on using saved funds to cover day to day expenses, or keep them invested

• Almost 60% of people think KiwiSaver should be compulsory

The latest ASB KiwiSaver survey highlights a wide range of thoughts and expectations about saving for retirement, and in turn how retirement savings might be spent in the future.

ASB senior wealth economist Chris Tennent-Brown says one clear view within the Q3 2018 survey and earlier editions, is that the vast majority of people believe they need to save more for retirement. In the latest survey 62% of respondents said they need to save more and another 18% were unsure. That leaves only 21% thinking they do not need to save more for retirement.

“As people get older, a slightly higher proportion of people believe they are on track, but even then, the latest survey shows that only 30% of respondents over 60 think they don’t need to save more. That leaves 56% of respondents thinking they need do need to save more for retirement,” Tennent-Brown said.

Identifying the need to save more is one thing, but knowing how much is required is another. Some 17% of respondents in the latest survey were unsure how much saving would be required each year in retirement. 20% of respondents think that the amount required per year is under $30,000 while another 31% think a figure between $30,000 and $50,000 each year will be needed. A remaining 25% think that over $50,000 per year will be required per year of retirement (a residual 6% of respondents preferred not to answer).

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Splitting the data into deciles, the survey finds that 25% of respondents between 50 and 59 don’t know how much they will need in each year of retirement. In contrast, for respondents over 60, only 9% were unsure, while 64% think that the amount required is between $10,000 and $50,000.

The quarterly survey aims to highlight how KiwiSaver might fit into the retirement puzzle. The latest survey shows 40% of respondents plan to use KiwiSaver to cover day to day expenses and provide income within retirement, and 11% plan on leaving the money in KiwiSaver once retired. Another 11% of people plan to use KiwiSaver to pay off mortgages or other debt. Splitting into deciles, 46% of people aged 30-40 and 54% aged 40-49 plan on using KiwiSaver to fund day-to-day expenses.

Reflecting the part KiwiSaver can play in first home ownership, some 25% of people under 30 plan on using KiwiSaver to buy a property, and this number steadily tapers off as respondent age increases.

There are a lot of uncertainties when it comes to retirement, and some 22% of respondents are unsure how they will use KiwiSaver. This uncertainty is highest within the 50-59 age bracket, where 33% of respondents were unsure or undecided on how they will use their KiwiSaver.

Within the latest survey, the KiwiSaver index eased slightly from 25% to 23% of respondents expressing confidence in their knowledge and understanding of KiwiSaver. Confidence remains lowest in the 30-39 age bracket, where only 16% of respondents are confident in their knowledge of how KiwiSaver works. Good returns was once again the stand out reason for satisfaction with KiwiSaver.

“With good returns a key reason for satisfaction, markets remaining volatile, and KiwiSaver knowledge still low, the survey highlights the importance of good financial planning and seeking advice to help with all the uncertainties,” Tennent-Brown says.

“At times like now when sharemarkets are volatile it’s especially important to seek help if investors are unsure what they should be doing. These days that help can be anything from sitting down with an advisor, through to using some of the latest online tools such as ASB’s KiwiSaver Explorer, to check everything from the appropriateness of a particular fund, through to imagining what retirement might look like, and how to save for it.”

ASB reports covering a range of commentary can be accessed at our ASB Economic Insights page: https://www.asb.co.nz/documents/economic-insights.html

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