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Saving 18% per year is 'unrealistic' - Retirement Commissioner

Published: 10:21AM Wednesday March 14, 2012 Source: ONE News

A "magic number" touted for retirement savings is unrealistic, the Retirement Commissioner says.

Diana Crossan's comments follow research by investment specialists Russell Investments that suggests Kiwis need to be saving 18% of their total income each year for a comfortable retirement.

Crossan told TV ONE's Breakfast today she does not think there is a "magic number" such as 18%, and retirement savings targets have been scaring New Zealanders for a long time.

"Some years ago people came up with 60-70% - all around the Western world - and that number was used," she said.

"Our website Sorted used 70% (of annual income, as a goal) on our calculator, but over the last few years we've begun to realise it's just not realistic. It doesn't suit everybody."

Crossan said New Zealanders should be thinking about what they want out of their retirement and save accordingly.

"New Zealanders should be thinking about what kind of lifestyle they need what they have to pay now, and how to manage their money throughout their life so they can get what they want out of retirement," she said.

People can live on NZ Super - Crossan

Crossan said around 40% of the population live on New Zealand Super, and 20% live on the scheme plus $100 extra a week, which indicates some level of personal savings.

"I'm not saying it's easy to live on New Zealand Super alone, but a lot of people do," Crossan told Breakfast.

"Of course a lot of those people get support from their family, and someone will be mowing the lawn, and somebody else will be helping with the rates."

A new six-monthly survey, to be released in August by Workplace Savings New Zealand and Massey University's Centre for Financial Education, will help show how far money goes in retirement, according to Crossan.

"What they're going to do is a retirement expenditure survey which will help us look at what it means if you have this budget or this budget in your retirement. You'll understand what you and your family need per week," she said.

Crossan said Kiwis are lucky with universal superannuation, and it means the country has one of the lowest rates of elder poverty in the OECD.