What's A Comfortable Net Worth For Retirement?

Date Apr 21, 2021
Blog category Kiwisaver
By Tina M.
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Contents:

Have you considered saving for retirement yet? If you’re in your 20s and earning more than most people your age, consider setting aside for your retirement as soon as you can. 

The “ideal” net worth for retirement depends on factors like annual income, age, and how much you’re saving right now. You can earn a lot when you turn 60, but due to inflation, you may still not have enough for the lifestyle that you want. 

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Why save for retirement?

Your retirement fund ensures that you can live comfortably by the time you decide to lessen your working hours or reach a certain age. NZ doesn’t have a definite age for retirement, but Kiwisaver and most superannuation plans begin to pay out members when they reach 65 years old. 

Not everybody is born on a silver platter. Some have to work extra to pay their bills and other expenses like school fees, loans and etc., lessening their chances to save up for retirement. 

It all boils down to what you want to happen in the next 30 years. You can have a family and still save enough for the future. It can be a lot, but it's totally worth it. You can start by learning about the importance of compounding interest, and providing proper allocations. Get the right people to guide you, and have the self-discipline when it comes to spending your money.

Knowing your net worth

Your net worth will determine two things: where you stand right now and how you can achieve your goals in the coming years. 

Assessing your current financial situation every year or two can also help you make decisions. You can ask for a raise or promotion, start investing in properties, or maybe venture into a business. And in some instances, you can question yourself, “Am I receiving enough?” “What else can I do to improve my finances?” “How much should I be getting for this job?” and so on. 

Net worth by age varies, most especially today. Young professionals are having a difficult time reaching their goals primarily because of the huge wealth gap that deprives average income earners of acquiring the same amount of money in their lifetime. 

It was reported that around 38,000 Kiwis or 1% of the population have $141 billion in trusts. This means that they pay less tax than the rest of NZ. 

You may not be as “rich” as these individuals now but there’s still an opportunity for you to attain your financial goals. 

Net worth by age and income source

To give you a glimpse of how much you can earn or should be earning yearly (or until retirement), here’s some data from Stat NZ on the household net worth and income of Kiwis last 2018. 

Average Weekly Income by Age

Income can also differ by gender wherein male workers or employees receive better salaries than women.

In addition, the table shows that people earn an average weekly income of $1260 by the time they reach ages 45 to 49. 

Age Male Female
15-19 $152 $115
25-29 $650-$1001 $508-$721
35-39 $1244-$1349 $741-$851
45-39 $1470-$1559 $851-$987
55-59 $1402-$1470 $878-$961

Average Yearly Income by Income Source 

Income Source Annual Income
Wage and Salary $90,806
Self-employment $77,882
Investments $13,932
Private Superannuation $25,382
NZ Superannuation $26,347
Other Government benefits $14,651
Other Regular Sources  $15,260

The average annual household income likewise varies depending on location. Those working in Auckland and Wellington get higher wages and salaries (around $117,000 and $116,000, respectively) than those in regions like Northland, Gisborne, Hawkes Bay, Manawatu, and Southland. 

Minimum amount to be considered rich in New Zealand 

Many Kiwis earn between $40,000 to $80,000 so it’s safe to say that a $100,000 yearly can be considered “well-off” despite having an existing mortgage and family to support. 

Retirement planning for high net worth

Being wealthy in this day and age can seem so far-fetched but it’s possible to earn higher than what you expect when you know how to manage your finances. 

Apply for a Kiwisaver account

Kiwisaver is an investment plan designed to prepare you for your retirement years. You can also use contributions to pay off debt, buy your first home, and even use it for hospital bills and medication. Whether you’re contributing voluntarily or through your employer, your retirement funds will grow by the time you retire, say, at 65 years old. 

Invest in rental properties

Investing in real estate in New Zealand is another way to earn a passive income. You can find cheap houses online that you can turn into rental properties and can bring you a yield of 5% or over depending on where the property is located. Whatever amount that you earn from there can be used for your retirement savings, not to mention the tax deductions you’re entitled to annually. 

Read: The Complete Beginner's Guide To Property Taxes In New Zealand

Use the 50/30/20 rule

If you really want to stick to saving more for your retirement, you can follow the 50/30/20 budget rule. You can ask a financial advisor to help you with budgeting but it would be a lot cheaper to do this by yourself.

This is how it works: you allot 50% of your income to fixed expenses such as rent and utilities, 30% to variable costs like food and entertainment, and the remaining 20% to your savings, debt, and retirement fund/s.

It would also be helpful to use a net worth calculator for retirement to get an estimate of how much you should be saving annually. 

Your retirement is just as important as saving for a home. You don't have to push yourself to earn this much at this age. It's all about changing your spending habits and focus on the most important things like shelter, food, hobbies, and spending within your means. 

Learn more about investments and Kiwisaver when you compare plans using the CompareBear comparison tool! 

About the author
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Tina M.

Tina M. is a content writer and an aspiring law practitioner. She mainly writes about real estate, finance, and investing. Ever the creative, she loves painting, home renovating, and getting meme ideas from reality TV.

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