How much will you need to retire comfortably?

For many Kiwis, planning for retirement often starts with one big, overwhelming question: how much do I need to save?

But instead of fixating on a scary six-figure lump sum, it can be more useful to think in terms of weekly income. That’s the money you’ll live on in retirement – and the key to setting a realistic savings target.

Let’s break it down into simple, manageable steps.

Focus on weekly income, not a lump sum

We get it – a figure like $600,000 or $1 million might sound intimidating. But what does that really mean?

We suggest another approach, and that’s asking: How much would I like to live on each week once I stop working? From there, you can work backwards to figure out what you’ll need to save.

Time to crunch the numbers

It’s difficult to imagine what your life may look like in 20 or 30 years, let alone estimate how much you’ll spend. A lot will depend on the kind of ‘golden years’ you have in mind.

Will you be travelling overseas often, or pottering around your garden and visiting the grandkids? Will you live in a city or somewhere quieter with lower living costs? These choices will shape your weekly budget.

To simplify things, a good rule of thumb is to aim for 70% to 100% of your current take-home income in retirement:

If you’ll own your home mortgage-free, you might only need to save enough to replace 70-80% of your current income.

If you’ll be renting or want a more active lifestyle, aiming for 90-100% may be more realistic.

For example, if you currently earn $1,200 per week after tax, a comfortable retirement income could be between $840 and $1,200 per week.

Where will that income come from?

Hopefully NZ Super will still cover part of it, but you need to make up the rest through savings and investments (and maybe even plan for a scenario where NZ Super no longer exists).

Besides NZ Super, most Kiwis rely on a mix of:

KiwiSaver

This is where many people build their main retirement savings. The amount you accumulate depends on your contribution rate, fund choice, investment performance and how long you’ve been contributing. Regular reviews make a big difference here.

Property

You might own a rental that generates income, or you may downsize your home to free up equity later in life.

Other investments

Shares, managed funds or term deposits can provide additional income streams in retirement.

Add these all up and compare the total to your weekly income goal. If there’s a gap, the next step is figuring out how to close it.

Bridging the gap

If your projected retirement income isn’t quite where you want it to be, there are steps you can take:

Consider increasing your KiwiSaver contributions – run your numbers using a KiwiSaver calculator to see what difference a higher contribution rate could make over time.

Review your KiwiSaver account – depending on your investment horizon and attitude to risk, you may look at a fund with a higher risk level, to help your money grow more effectively in the long term*.

Diversify your investments – it’s always a good idea not to put ‘all your eggs in one basket’; get in touch to explore other investment options that align with your goals.

Adjust your retirement age or lifestyle expectations – retiring a few years later (if you can afford it) can reduce how much you need to save.

What does that translate to in lump-sum terms?

Once you’ve settled on a weekly retirement income target, you can work out the total lump sum needed.

Here’s a simple formula: Weekly income goal x 52 weeks x number of years in retirement (assume 30 years if retiring at 65 and living to 95).

For example, if you’re aiming for $1,000 per week for 30 years: $1,000 × 52 × 30 = $1.56 million.

Remember: NZ Super, KiwiSaver and other investment returns can all contribute. The key thing is to have a plan and make it happen, the sooner, the better.