The Governments Got Retirement Wrong: We Ran The Numbers

While New Zealand Super can cover very basic living expenses, it’s increasingly clear that it’s no longer enough to sustain the lifestyle many aspire to. In today’s world, Superannuation should be seen as the minimum — covering the basics like utilities, groceries, and basic transport — but not much more.

Massey University’s research breaks retirement living into two budgets:

• No Frills Budget: A very basic standard of living with minimal luxuries.

• Choices Budget: A more comfortable lifestyle allowing for some travel, hobbies, and extras.

For Kiwis aiming for a Choices lifestyle, New Zealand Super leaves a considerable gap to fill.

When comparing New Zealand to Canada, the differences are striking. In Canada:

• 80% of public sector jobs offer a pension.

• Workers receive payments from the Canadian Pension Plan (CPP).

• They also access Old Age Security (OAS) and a supplement for low-income retirees.

A retiree in Canada could receive up to NZD $2,700 per month in benefits compared to New Zealand’s approximately $1,200 per month through Super alone.

KiwiSaver is an important tool, but it’s not a complete retirement solution. For example:

• A 30-year-old earning $100,000 and contributing 3% into an aggressive KiwiSaver fund would have around $440,000 (inflation-adjusted) saved by age 65.

The problem? That figure falls far short of what’s needed.

Based on Massey’s Choices lifestyle:

• Retirement would require about $90,000 per year for a couple.

• New Zealand Super covers roughly $41,500 per year.

• This leaves a gap of around $48,000 per year.

When running the numbers, to safely cover that gap, you’d need savings of about $1.225 million by retirement — far beyond what many are on track to achieve through KiwiSaver alone.

One of the biggest worries in retirement isn’t missing out (FOMO) — it’s FORO, the fear of running out of money.

As financial advisers, our role is to help Kiwis understand:

• Is their current lifestyle sustainable into retirement?

• Can they actually afford to spend a little more now, knowing they’ll be secure later?

• Or do they need to change course to avoid running out later in life?

If retirement savings fall short, one option often promoted is the reverse mortgage. These products allow retirees to borrow against their home’s equity without regular repayments. However:

• Interest compounds monthly onto the balance.

• The loan becomes due when the house is sold or the homeowner passes away.

• It can dramatically reduce the inheritance left for family.

While sometimes necessary, reverse mortgages are seen as a last resort and can be financially risky if not carefully planned for.

Using the Massey University Choices metropolitan budget:

• A comfortable retirement would cost around $90,000 per year.

• Essential expenses like utilities, insurance, and rates would take up around 26% of the budget.

• Ongoing costs like gifts, health expenses, and car maintenance would consume about 16%.

• Daily expenses like groceries, transport, and discretionary spending would make up 35%.

Even small items — like Spotify, Netflix, and gym memberships — were factored into this lifestyle, highlighting that even a “comfortable” retirement is not extravagant.

Health insurance costs, in particular, are expected to be significant — estimated around $737 per month (or 8.5% of the retirement budget) for a couple at age 65.

One critical point: the type of KiwiSaver fund you choose matters enormously. If you haven’t made an active fund choice — or if you’re not sure if your fund matches your retirement goals — it’s crucial to get advice. The right fund could mean the difference between scraping by and living comfortably later on.

If you’re planning to rent during retirement rather than own a freehold home, the gap will be even bigger. Renting long term can work, but it requires:

Building enough assets to fund future rent.

Having a clear financial plan to ensure ongoing affordability.

It’s not impossible — but it does require forward thinking and investment outside of just KiwiSaver.

New Zealand Super alone isn’t enough to fund a comfortable retirement for most Kiwis — it mainly covers the basics.

KiwiSaver, while helpful, often falls short. A typical KiwiSaver balance might reach around $440,000, but living comfortably could require $1.225 million in savings.

Massey University’s research shows a Choices lifestyle for a couple costs around $90,000 per year, while NZ Super only covers about $41,500.

The retirement gap is significant — about $48,000 per year needs to come from savings or other investments.

Fear of Running Out (FORO) is real — proper planning can help avoid overspending or underspending during retirement.

Reverse mortgages can be risky and reduce the inheritance left for families — best seen as a last resort.

Choosing the right KiwiSaver fund is critical — it can have a massive impact on your final retirement balance.

Planning for retirement needs to start early, especially if you plan to rent long-term instead of owning a freehold home.

It’s not too late to get your retirement strategy sorted — speaking with a financial adviser can make a major difference.

At Lighthouse Financial, we specialise in building clear, actionable financial plans tailored to your goals. Whether you’re just starting your KiwiSaver journey or need a full retirement plan, we’re here to help you get it right. Book a free consultation here

If you’d like to learn more, check out these other episodes below.