How Much Retirement income is Enough?


How much is enough?  An Australian group “Association of Superannuation funds” said a comfortable retirement for Australians, was $A56.296 for a couple, and A$41,090 for a single person. Tom Thompson writing in World Investor a New Zealand publication, said a common rule of thumb is retirees need enough to replace 70% of their pre-tax, pre-retirement income.

Some of the above will come from New Zealand Superannuation, investments, perhaps a private or company pension. If one managed to save a sum of $500,000, and you wanted $35,000 pa from that investment, you would need to have 7% returns before tax on your investment, and that’s not taking future inflation into effect, so you probably need 9% plus return. Is anybody getting that, and if they are, the majority will not!

A 2011  survey for the Financial Services Council showed that the  income the average Kiwis felt would give them a comfortable retirement, was on average almost double the amount provided by NZ Super.

Alan Clark in a September 2013 article printed in the 50 plus magazine Forward 50, said a single retired person wanting a comfortable living will need about $35,000pa and a couple about $45,000. Clark’s article also drew attention to spending trends post retirement on specific items. His examples included

  • $40,000 to upgrade the car a number of times
  • $10,000 for a new roof
  • $3000 per eye for cataracts
  • $18,000-25,000 for a new hip or knee
  • $10,000 for someone in the family with a distress issue
  • $10,000 to $50,000 in loans to children that don’t come back
  • $20,000 to upgrade the kitchen
  • $10,00 for new carpet
  • $20,00 for altering home for mobility issues
  • $……… for grandchildren

Obviously everyone does not incur these costs, but some will occur for most. Investment income is the normal way to cover such occurrences

Jeff Matthews in a 2013 article printed in The Press said this question is the hardest one for people to answer, and he suggested  best guess  assumptions  are normally 10-15% understated. Jeff used the average weekly household expenditure figures for June 2010, the figures being $1010 a week, or $52,540 a year.

He calculated that to fund the average household expenses for a 20 year period you would need a lump sum of $859,104. He excluded any work& income, NZ Super or rental income, and determined the following

Lump sum required to generate an income, Tax paid income (20 years at 2.0% real after tax and 2% inflation)

  • $40,000-$654,000
  • $50,000-$817.500
  • $60,000-$981,000
  • $70,000-$1,144,500

The figures are scary, but NZ Super will probably contribute a large portion of income calculations to meet the figures above.

NZ Superannuation for a couple is currently annually $25,953 tax paid. Expenses of $52,540, leaves a shortfall of $25,587, and it’s that balance you have to find. Personal savings, investments, and some of the value of your current home might be ways of meeting the difference!


Whatever the theoretical implications , remember 40% of all New Zealanders 65 years, and over, rely solely on New Zealand Super, and a further 20% have less than $100 weekly from other sources.

That’s why the current model for NZ Superannuation is vital to continue for many years, while adjustments in savings patterns, opportunity and scheme developments e.g. Kiwi saver takes place. The universal, simple taxable pension NZ operates with is a world leader.


In current terms, a sum of $20-$25,000 per annum  on top of NZ Super for a couple is perhaps somewhat  in the vicinity of a “reasonable assumption” a couple may target. What’s normal or average will always be a discussion point and different needs and assumptions will apply.

The pathway towards equity for society is probably New Zealand’s model NZ Superannuation scheme, compulsory Kiwi Saver at a level somewhat higher than current, and annuities required for most of the final sum generated under the Kiwi Saver scheme. Say 80% annuity and 20% as a discretion lump sum within Kiwi Saver retirement final payment calculations.

Alec Waugh

One thought on “How Much Retirement income is Enough?”

  1. “Say 80% annuity and 20% as a discretion lump sum within Kiwi Saver retirement final payment calculations.”
    With the option to opt out of course. If a couple saved every single disposable dollar and reached a lump sum of $1.2 million in cash, why the decumulation of capital is necessary? In May 2017, Even NZ banks pay 4.3% on term deposits (4-5 years) That is $51,600 before tax of 17.5%. ( income split for tax purposes) Together with 31k NZ super, a total income of $73570 Per annum. Applying the 4% rule, total income should be $ 70,600. This will grow the capital instead of depleting it. It’s just my French way of thinking and I share it.

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