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How Much Do You Really Need to Retire in NZ? · Making Cents

• 0:00
  There's nothing quite like that freeze moment of a big important goal that you know will be crucial to achieve.
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  But it's big, it takes years and frankly feels impossible.
• 0:11
  So no wonder chat about retirement feels so stressful to so many of us when we constantly see headlines telling us things like you need a million dollars minimum before you even think about retiring, and you'd better diligently trudge
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  away for decades to make that happen or life will be awful.
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  That is a bad pitch.
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  And what if it's wrong and freaking you out for no reason?
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  EnableMe head strategic coach Katie Wesney helps people find their actual number, not the scary one, and says there are a lot of myths that make it scarier than it should be.
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  It's a really daunting number.
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  And when you see often like a really big daunting number, you're like, oh, too hard.
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  Why try?
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  Because the key here is starting from what's enough for you specifically, and then working backwards from your number.
• 1:04
  Your version of retirement we're trying to anchor it to what do you need to be spending to live a happy life?
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  So welcome to Making Sense.
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  It's the podcast for people who want financial freedom without giving up their coffee.
• 1:15
  I'm Frances Cook, a financial journalist and fellow financial freedom seeker who makes money simple for you.
• 1:21
  Today, breaking down the $1 million retirement.
• 1:25
  Myth, Making Sense has partnered up with EnableMe to get you the strategies for reaching financial freedom faster.
• 1:33
  Head to their website to learn more.
• 1:35
  Visit Enable Me.
• 1:37
  Today.
• 1:38
  I want to help as many people as possible build a better life for themselves by understanding and taking control of their money.
• 1:45
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• 1:47
  First, make sure you're subscribed wherever you like to listen, whether it's YouTube, Apple Podcasts, or Spotify.
• 1:53
  And then send your favorite episode to a mate.
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  Then we can all level up with money together.
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  The show grows, and I can keep bringing you the money info that actually moves the dial.
• 2:03
  Welcome in, Katie.
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  So great to have you back in again.
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  Look, I think we get these incredibly daunting figures thrown around of what you'll need for retirement.
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  Otherwise you're going to be eating cat food and being in the cold and it's going to be terrible.
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  One of the benchmarks I've seen a lot is this idea of you need a million dollars saved or invested million bucks.
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  Is that benchmark true?
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  For some people it's true.
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  For some it's not.
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  And I think that it's largely unhelpful for most people because it's a really Daunting number.
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  And when you see often like a really big daunting number, you're like, oh, too hard.
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  Why try?
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  And so I think unhelpful, actually.
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  And I think it's really important to understand your number because everyone's different.
• 2:49
  Could not agree with you more.
• 2:50
  Okay, so if we're then taking a step back and saying, okay, I need to figure out my number and what I need, I think that's daunting in a different way though, because a lot of people sort of imagine
• 3:01
  spreadsheets and it gets a bit freaky looking at your own numbers.
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  So where do we start in figuring out our own numbers?
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  What's realistic, what's possible?
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  So first place I would start is to figure out what your current life costs you.
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  Because actually your version of retirement, we're trying to anchor it to what do you need to be spending to live a happy life?
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  Because essentially that's the number you're trying to feed in retirement when you're no longer working.
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  So I think understanding your current snapshot, super useful in terms of what comes next.
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  Okay, so what would you do?
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  Like print out a bunch of bank statements from the month, go through that, see what you're spending?
• 3:38
  Yeah, 100%.
• 3:39
  I'd go through maybe three months of bank statements, pick out the things that likely won't continue.
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  When I'm retirement planning with my clients, I want them to be mortgage free.
• 3:52
  So hopefully you don't have a mortgage cost into retirement because then obviously your number has to be a lot bigger because you're trying to fund that debt or paying rent as well.
• 4:02
  Also you're trying to back out, you know, our kiddies, costs, et cetera.
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  Because again, part of retirement planning is making sure that your kids are empowered.
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  And we talk about this so often.
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  I think having to support kids longer than you should into retirement is a real challenge for lots of Kiwis.
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  So again, you want to strip out those unnecessary costs.
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  Sometimes it's getting a little bit fun as well.
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  Adding in the travel, acknowledging you might want a little bit more for healthcare, but understanding your baseline anchored to what you're actually doing right now.
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  So print out those bank statements.
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  Understanding what would continue, what you'd like to add, and then you've got a number.
• 4:41
  Yeah, and I think another thing as well that I underestimated as well is going to work can also be expensive.
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  You know, you've got your commute, you've got like potentially slightly nicer work clothes that you might need, depending if you're self employed.
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  Maybe you're sort of like buying some things that might not always be tax deductible, this stuff.
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  And so I think if you're, you're really clear about now, what are the things I actually need to live?
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  What are the things I want to keep doing?
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  Maybe you've got some hobbies and stuff and, and adding that up, just being really ruthless as you go through, but also realistic.
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  You don't wanna take everything out and be like, oh, I need $20,000 because I took everything else.
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  Absolutely.
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  And I think for a lot of people, they're like, oh, she'll be right.
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  I spend hardly anything.
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  And you're like, well, if you unpack that, you know, a household, maybe one person's on 80, maybe you're both on 80k, pre tax, there's 160k.
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  And if you don't have much change from that, well, your money's going somewhere.
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  So again, I think always eyes wide open, really important.
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  So that first step is understanding that spend.
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  But then you want to understand, well, what is my asset position as well.
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  So you want to kind of tot up all those assets.
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  So if you have property, there's any debt that you have.
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  When you look at that debt piece, you're figuring out, well, how quickly can I pay off that debt?
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  Because again, that feeds into your capacity going forward.
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  Figure out that KiwiSaver balance.
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  There's lots of really useful calculators as well in terms of, well, if I keep contributing what I'm contributing, what will that likely be?
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  Cause you're figuring out a what you need anchored to what you spend.
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  Then you're figuring out what you have and what you likely what that will be on retirement.
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  And usually there is a gap.
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  So we're not frightened of gaps.
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  We want to understand the gap between what you need and what you will likely have.
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  And then you want to have a strategy to close that gap to ensure you can live a good life.
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  So once you've figured out how much you actually need, the next trick is figuring out a way to have that money there without you having to go to work every day.
• 6:54
  Right.
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  So you know what you mentioned there about the asset position?
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  So important.
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  But break it down a little bit more for us, because if you've got assets, whether it's property, whether it's, you know, shares through KiwiSaver or your own investments, all those sorts of things.
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  Saving or investing.
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  Investing, yeah, yeah.
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  You want to turbocharge that growth again as part of that overarching retirement strategy.
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  You want to Understand the ordering around.
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  You know where you're leaning in terms of that retirement strategy.
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  For example, if you're in your 40s and you've got a big mortgage, well, that's the biggest lever you can pull right now to get that down a bit faster in terms of that retirement planning.
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  Also making sure that kiwisave is working really hard in the background.
• 7:37
  Yeah.
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  And it's funny, isn't it, because you must see this a lot in terms of the difference between what your money does in a savings account, term deposit or whatever versus investments like property or shares is huge.
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  On paper, it can look like a smaller percentage difference that I think tricks us into not realizing how big that difference is.
• 7:56
  Right.
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  You're so right.
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  And because everything compounds and you know, often when we talk about kind of inefficiencies from a cash flow perspective, we know that people fritter about 15% of their net income.
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  And that could be a little bit of overspending.
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  It could be paying too much interest on your mortgage.
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  And for some people that might be $10,000, $20,000.
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  But you think some people are like, oh, $10,000, I'd just rather live a happy life.
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  Oh, well, I'll just jog on.
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  And you think, well, $10,000 that you don't have to come up with in terms of your happy life in retirement.
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  You extrapolate that over 25 years.
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  So assuming you retire at 65 and want to keep you at least to 90, you think, well, not having to find $10,000 every year, that's $250,000 less you have to come up with in terms of retirement strategy.
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  For a lot of people, they're like, eh, it all comes out in the wash.
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  Why try?
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  I'm busy.
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  Cost of living crisis.
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  But just little amounts are just so impactful in terms of how they can move the dial or not and the talk in the media or just that general commentary in terms of a million dollars, will super exist or
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  will it not?
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  People tend to freeze, as you said, kind of bury their head and think it's all too hard.
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  And actually that's the worst thing you can do because there's lots of things that you can do.
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  But again, you start where your feet are, understand your position, print out bank statements.
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  Generally it's a bit jarring.
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  You're like, ah, last three months keeps coming and coming.
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  Like, how is this possible?
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  Who is this gremlin spending all of my money?
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  But I think again, facing where you're at is really important because that's the first step in fixing this and feeling empowered and moving forward 100%.
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  And I always think as well, and this is something that I have really changed when I first started looking at money, talking about money and fixing my own money at the same time as talking about it.
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  Because I really do try to practice what I preach and not be a hypocrite.
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  And where I started was I didn't.
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  Like looking at things and it did freak me out and I would ignore stuff.
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  Now, whenever I did that, I still knew there was a problem building up.
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  It was actually more stressful being like, there's an elephant in the room, but I mustn't look at it.
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  Oh God, don't look at the elephant.
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  You know the elephant is there.
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  It actually doesn't help at all.
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  So even when you look at your money and it might freak you out a bit and you're a bit like, oh, that's not necessarily entirely what I was hoping for.
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  I would still feel better after that, even if I then had to be like, now what?
• 10:36
  Yeah.
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  Oh, absolutely.
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  And I think also the problem can feel really magnified.
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  It's like, right, I'm here to sort retirement and actually that's like a big problem to be solving.
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  So break it down to one task.
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  So put the one task on your to do list.
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  Print three months of bank statements and that may be the first task of the week.
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  And then next week it's, well, I'm going to sit down and try and figure out where all of my money is going now.
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  So I think if you can break it into those incremental steps, you feel like you're moving forward.
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  And again, that uncertainty and that kind of sick feeling in the pit of your stomach starts to alleviate.
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  Not so fun fact.
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  When you take on a 30 year mortgage, you'll probably pay more than double.
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  What you originally borrowed because of the cost of interest.
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  That's probably not the Kiwi dream you bought into.
• 11:32
  The team at EnableMe specialize in taking charge of your money and growing your wealth, including how to get rid of your mortgage faster.
• 11:40
  Book a consultation with an EnableMe financial advisor today by visiting Enable Me.
• 11:48
  How do you figure out, you know, I've got these certain amount of assets or this certain pot of investments and then I can take out of that what, you know, like, how do you match up that here's my
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  spending versus here's what I hope to have invested.
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  How do you make that work?
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  I think that's coming down to having a really good financial plan in terms of Understanding your position now because that's seeding what you need in the future and then you're figuring out, well, what's left over and how I'm
• 12:20
  going to channel that in terms of investments.
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  So again, Frances, that could be paying off your debt a bit faster because if you're a mortgage free faster, that gives you more time to save or invest further.
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  It might be I'm going to siphon off a little bit more for kiwisaver, I'm going to siphon off a little bit more, manage funds topping up a property.
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  So you're understanding well how I'm, how am I going to channel that and what is that end effect going to look like in terms of gain?
• 12:47
  Yeah, yeah.
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  And it's quite amazing because I think.
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  A lot of people know that if you have an investment property, then there might be rent coming off that.
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  And that's quite a simple thing where people be like, oh, well, there we go, there's my income.
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  You can also get income producing funds if you put it into a dividend fund or something.
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  If you're just wanting an easy option, those sorts of things exist and you can look at those and be like, okay, what's the average that comes out of that and what could work for me?
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  There's all sorts of different percentages and numbers that people put in.
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  There's the 4% rule that some people talk about where you can take out 4%, some people disagree with that and say it could be as much as 5% that you could take out each year, but you can find
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  these things.
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  And it all comes back to, as you said, starting with what do you actually need?
• 13:34
  Exactly right.
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  And I think that remembering that 65 isn't a cliff, we're not going to suddenly cash in all our investments thereafter.
• 13:43
  Well, please, please don't, please don't, please don't, please don't.
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  It's understanding.
• 13:47
  Well, it's almost like you're thinking of those investments in terms of buckets, in terms of when you might use it, because that's going to tell you the risk that you can afford to take.
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  Because even at 65, if you've done it well, so much of your wealth you're not going to need to access for hopefully 5, 10 years.
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  You want that still to be working really hard for you.
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  And I think that's when it's really important to have that really well diversified investment strategy that's going to really serve you in retirement.
• 14:19
  Yeah.
• 14:19
  From the people that you deal with.
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  I mean, obviously I'm sure, it's a certain sector of society that you see more often in your office.
• 14:26
  But still, from what you see and experience, do you think more people tend to overestimate or underestimate what they will need in retirement?
• 14:34
  Oh, underestimate for sure.
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  For the vast majority of people, they will have a gap, and it's just understanding the quantum of that gap in terms of what they're on track to achieve, what they need, and having a strategy to close it.
• 14:48
  Often, if the quantum is high, generally speaking, for lots of people, not all people, generally, they're going to have to think about how to leverage to close that gap in terms of they might have to more buy another
• 15:03
  property, because that's again, going to turbocharge that growth.
• 15:07
  But understanding what they should buy, what's that going to give them and what they can afford, really important as part of that conversation and not the right move for everyone.
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  Everyone's different.
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  So then that comes back down to your number.
• 15:21
  Cause actually sorting retirement at its very base level is to give you more options.
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  I was listening to a speech and they said, in terms of that retirement planning, what we're trying to do is give people dignity and choice.
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  And again, I think that's so beautiful.
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  Cause that just sums up retirement, doesn't it?
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  Dignity and choice.
• 15:41
  And again, take that control and start figuring out what you need and have a plan around that.
• 15:48
  You read my mind.
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  Because the next thing I was going to ask you is, you know, what can enough look like?
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  Because I think it is a really important thing to say.
• 15:55
  You want a good quality of life, but it can also be this thing where the goalposts move endlessly and you never feel like it's going to be enough.
• 16:05
  And there's this ongoing pressure of, oh, just a little bit more, a little bit more, a little bit more.
• 16:09
  Right.
• 16:10
  So, yeah, what does enough look like when you're trying to plan that out with clients?
• 16:14
  Again, it just comes down to what you want.
• 16:17
  And that balance piece, Frances, it is so important that happy life, because I don't think anyone can have a plan that's just based around deprivation and not enjoying your life now.
• 16:29
  I mean, most people last five minutes, right, with all the will in the world.
• 16:32
  So I think getting that balance right of living a happy life now, putting away something for the future that is sustainable, and that is going to be the sustainability of any plan going forward.
• 16:44
  So, again, you're enough for most of my clients, they don't come to me and say, I want to be the most wealthy person in New Zealand for most people.
• 16:52
  Again, they want a little bit more financial freedom and they want more security for them and their family.
• 16:57
  And that's a beautiful goal.
• 16:58
  Everyone deserves that.
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  But what are you doing to facilitate that in your life?
• 17:04
  Well, all right then.
• 17:05
  If someone's listening to this and they felt a little bit daunted until now, and they're feeling the rev and they're like, okay, Katie, I'm gonna do it.
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  What's one thing they can do this week to make meaningful progress?
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  Have a look at your position.
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  Now, print out those bank statements.
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  Understand what your cash flow position is, because that feeds everything.
• 17:21
  Thank you so much.
• 17:22
  Katie Wesney from EnableMe.
• 17:23
  As always, breaking it down for us.
• 17:25
  Now, if this was helpful, send it to a friend.
• 17:27
  We can all level up with our money together.
• 17:28
  Until next time, have a great day.
• 17:31
  This podcast can only give you general information about how things work in most situations.
• 17:37
  It's not individual financial advice.
• 17:39
  If you're after that, a financial advisor is always the best bet.