How confident do you feel about your retirement savings? According to this 2021 research paper, there are four important drivers of retirement confidence in retirement for Kiwis aged over 54:
- Owning your home
Homeowners are much more confident about their retirement savings, and this makes perfect sense. It’s about security; you can stay there for as long as you like, and your accommodation costs are low and stable. Even a small mortgage at age 65 is a better feeling than facing the uncertainty of renting.
Of the people surveyed who were still working after age 65, homeowners were more likely to work just because they enjoyed it, rather than because they needed the money.
“I don’t intend to retire; nothing to do with money, purely to do with my enjoyment of work,” was one comment from a 66-year-old man living in Hamilton. Much more depressing was the view of a 66-year-old man from Auckland who told the researchers, “If you don’t own your own home you have to work until the day you die.”
- Having savings and investments: self-funded retirement income
Do you have sources of money beyond superannuation? Living on the superannuation payment is a squeeze for most people, so those with a savings buffer were more confident about their retirement.
Having investments, even just KiwiSaver, added another confidence boost. If you have a strong portfolio of investments, you probably have good reason to be fairly optimistic about your future.
We know that those aged 55-plus make up a large proportion of Zagga’s clients, with a significant chunk of them aged over 70 – and even a few in their 90s. In our experience, those clients are super confident about the future and usually enjoy a high quality of life.
- Being retired
Confidence increases with age. The low point for retirement confidence is age 55 to 64, where retirement is on the horizon and it can feel scary. Once people actually retire, their confidence increases. This suggests that retirement is better than what we imagine it will be, rather than worse.
That’s not a reason to sit back and relax – the panicky years probably spur us on to save a bit harder, contributing to that higher confidence after 65. But it does mean that your worst fears may be exaggerated.
- Having a financial advisor
Having a financial advisor raises confidence in retirement savings; 12% of low earners (under $30,000 annually) used a personal advisor, rising to 16% for those earning $30,000 to $70,000, and then to around a quarter for those earning over $70,000. Almost half (46%) spoke to their advisor more than twice a year.
Getting professional advice can really help you maximise your retirement funds. They can help you diversify into a range of investments, so your portfolio is balanced and it continues to bring in as much income as possible once you’re no longer working.
Enjoy your money!
If you do maximise your funds, hopefully you can enjoy life as much as this 68-year-old accountant from Christchurch, who told the researchers that he wasn’t paying for his kids to have all the fun.
“People worry too much about trying to only live off the interest from their investments – they need to learn how to live off the capital also… My three children will earn far more money in their lifetimes than I ever earned in mine, and I was a Chartered Accountant. Can’t see why I should fly cattle class when I fly overseas, then when I die, my children and their families fly business class – thus Dad flies business class!”