Key Takeaways
- Retirement is a significant financial change that requires planning and consideration of several factors, including the right time to retire, living arrangements, lifestyle, and investments.
- New Zealand does not have a set retirement age, and individuals can claim NZ Super while still working, but early retirement can have consequences on financial resources and social adjustment.
- It’s essential to consider health, longevity, and lifestyle when planning for retirement, as well as setting goals and plans for staying connected with others and avoiding social isolation.
- Investing is not a one-time event, and individuals should continue to manage their investments in retirement to make their money last as long as needed.
- Having a plan and seeking advice from financial advisors is crucial to ensure a successful and enjoyable retirement.
Introduction to Retirement Planning
Retirement is one of the most significant financial changes that many people experience in their lives. As individuals approach retirement, they should ask themselves several questions to ensure a smooth transition. These questions include when to retire, where to live, what lifestyle to maintain, how to stay engaged and connected, and how to manage investments. Answering these questions requires careful consideration of various factors, including financial resources, health, and personal goals.
Determining the Right Time to Retire
One of the most critical decisions individuals face when planning for retirement is determining the right time to retire. In New Zealand, there is no set retirement age, and individuals can claim NZ Super while still working. However, early retirement can have consequences on financial resources, as it shortens the time available to save for retirement and lengthens the retirement period, putting extra strain on financial resources. Liz Koh, founder of Enrich Retirement, notes that retiring early can also be a tricky social adjustment, as many friends and peers may still be working. On the other hand, working past 65 can be beneficial, as it allows individuals to continue leading an active life and maintain social connections.
Considering Living Arrangements
Another essential factor to consider when planning for retirement is living arrangements. Individuals should take stock of their financial lives and consider where they will live in retirement. Some retirees may be "asset rich but cash poor," with their money tied up in their homes. Downsizing or moving to a cheaper area can be a viable option for those who need to free up cash. People living in smaller centers can generally get by on less money than those in big cities. Koh suggests that individuals should consider their financial situation and living arrangements carefully to ensure a comfortable retirement.
Planning for Lifestyle and Health
When planning for retirement, individuals should also consider their health and longevity. Koh recommends that individuals think about their health and how long they are likely to live, based on the experience of family members. They should also consider how long they will be in good health and plan accordingly. For couples, it’s essential to consider the differences in lifespan and healthspan between partners and plan based on the partner with the shortest lifespan or healthspan. Individuals should also think about their lifestyle and what they want to achieve in retirement, including setting goals and plans for staying connected with others and avoiding social isolation.
Staying Engaged and Connected
Retirement can be a significant change, and individuals should plan for how they will spend their time and stay connected with others. Koh notes that social isolation is linked to depression, poor health, and potentially a shortened life span. Individuals can join organizations such as MenzShed and Probus, which enable retirees to interact with like-minded people. Other options include hobby and interest groups or volunteer organizations that provide opportunities to build friendships with others. Joining such groups before reaching retirement can make the transition easier, and individuals can always set up their own groups if nothing is available in their area.
Managing Investments in Retirement
Finally, individuals should not think of 65 as the finish line for their investing. David Boyle, general manager of KiwiSaver at Fisher Funds, notes that people should work out the best way to make their money last as long as they need it to. They may have some investments for the latter parts of their retirement, which could have more exposure to growth assets, and some that are in less volatile investments that can be used to fund the things they want to do in the first 10 years of retirement. Having a plan and seeking advice from financial advisors is crucial to ensure a successful and enjoyable retirement. Individuals should not be afraid to change their plans if their circumstances change, and they should continue to manage their investments in retirement to make their money last as long as needed.