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Managing your money wisely in retirement

Managing your money wisely in retirement is a common concern for many retirees. You may be looking forward to kicking your feet up after many years in the workforce. However, it’s likely that you’ll need to make a few changes to your lifestyle and financial management to allow you to relax and enjoy your golden years. The last thing we want in retirement is stress or worries about money.

Careful planning and learning about wise money management can greatly improve your retirement experience, offering you more independence as you pursue hobbies and interests. It may also reduce the need to financially burden your family who may feel responsible for looking after you when you can no longer work.

In this guide, we’ll offer some helpful ideas for making your savings and pension go further and advice on steps you can take towards gaining financial independence in retirement so you can get on and enjoy it.

Tip 1 - Start planning early

Depending on your personal circumstances, you may be looking forward to retirement - or feeling a little reluctant about it. Either way, for most Kiwis retirement is inevitable, so the sooner you can start thinking about it and planning for it, the better prepared you can be when the time comes.

There are a few things you should think about and discuss with your partner or loved ones, such as:

  • Where you will live and with whom?
  • How will you take care of yourself if you are no longer as mobile?
  • How much will you need to cover your living costs and expenses?
  • Are you likely to need help at home?
  • How long do you need to plan for?

Thinking about these things early can help you anticipate how much you may need to retire. They may come in handy when attempting to calculate and budget for your retirement. Talking to friends and family who are already retired might help fill in knowledge gaps you have offer ideas on how to best set up for your future.

Tip 2 - Know what benefits and services are available to you

When thinking about managing your money in retirement, it's important to know what benefits and support from the government are available to you.

Superannuation

In New Zealand, most Kiwis over 65 are eligible to receive fortnightly payments from the government. How much you can get will depend on your personal circumstances like your relationship status, living situation and any other payments you may be receiving. These include income, ACC or an overseas benefit. You can find out more and apply when you are approaching 65.

Veteran’s Pension

If you have served in New Zealand’s armed forces during a war or recognised emergency, you or your partner may qualify for a Veteran’s Pension.

SuperGold Card

If you get NZ Superannuation or a Veteran’s Pension, you automatically get a SuperGold Card. Once received, you can enjoy the benefits such as discounts at local businesses. You’ll also access discounted council services like library services, parking concessions and rates rebates. And for many the best part is using a SuperGold card for free or discounted off-peak travel on public transport. These sayings can quickly add up and come in handy when managing your expenses in retirement.

Health and Disability Support

If you or your partner have a health condition or disability, there are a number of ways that Work and Income may be able to help. If you have to retire early because of a health condition or disability (or require in-home care or residential care), there may be financial help you can get from the government or community organisations.

It’s worth noting that if you’re in a position to plan ahead for your retirement, a Cigna adviser can talk to you about your insurance which will make up one portion of your retirement plan. An options that may be suitable is Complete Disablement Cover as part of an Assurance Extra policy. This can help cover your living expenses and other costs around your care if you become completely disabled due to illness or injury.

Other Government help

There are many different benefits and services available to help you reduce or cover costs in retirement. As you age, you can see an increase in expenses that you may not have anticipated. These can differ from person to person, but you may find needing more prescription medications, more frequent dental work or visual or hearing aids. You may also need to repair or modify your home which can be costly There are grants and subsidies available to help senior citizens with these expenses, so it pays to know what support you may be eligible for.

KiwiSaver

KiwiSaver is a savings scheme set up by the New Zealand government to help kiwi’s save for their retirement. You can withdraw your KiwiSaver when you turn 65, or if you joined the kiwisaver scheme before 1 July 2019, have been in a scheme for at least 5 years.

You can take all of your KiwiSaver out when you are eligible, but you don’t have to. Many Kiwis choose to leave their KiwiSaver account open while they are still employed, allowing the fund to continue to make returns. Or, you may choose to make partial withdrawals as needed to top up your NZ Superannuation, or when you need funds for larger purchases and expenses.

Income after you turn 65

Your NZ Super and any additional benefits may not be enough to cover all costs in retirement, especially given the increase in our life expectancy these days could mean you are retired for over 20 years. Many Kiwis rely on additional income earned in retirement, either from personal savings, investments or dividend payments.

Income in retirement can also come from selling assets, such as your car or home or renting out your property. If you are still earning an income in retirement, it's important to make sure you declare your income to both Inland Revenue and Work and Income so you are paying the correct amount of tax and receiving the appropriate benefits.

Tip 3 - Don’t be afraid to right-size

An important part of managing your money wisely in retirement is managing your costs and reducing these where possible, so you can spend money on the things you really want to, rather than maintaining a home that’s too large or too far away from family and friends.

For many, retirement is a great time to reconsider the size of your home and contents and how suitable it is for you in retirement.

Selling a large, existing family home and opting to purchase a smaller home, perhaps in a neighbourhood closer to your family can oftentimes free up cash while still offering the benefits of homeownership.

Selling isn’t the only option for minimising home expenses. Shared living or multi-generational living with family may be an option worth discussing with family members. In some cases, you may be able to sell your home to a family member whilst continuing to live in a part of it, benefiting from a reduction in mortgage payments and shared property maintenance costs, not to mention help with the upkeep of your home.

Co-housing or flatting with friends and other couples can be an affordable option for those who don’t wish to move into a retirement home and want to maintain independence while remaining in their own neighbourhood.

Subdividing your section and building a suitable unit or ‘granny flat’ may also be an option to downsize and move to a lower maintenance property while remaining in your neighbourhood.

The benefits of downsizing aren't just financial. As mobility decreases as we age, a single level dwelling may be more desirable. Smaller homes and units are often a lot easier to heat, clean and maintain, freeing up time for you to pursue your hobbies and interests and spend time with loved ones instead.

Tip 4 - Understand your regular expenses

Managing your money wisely at any life stage is about knowing what your regular expenses are then reducing these where you can to make covering them is easier.

Regular expenses to think about when planning for retirement may include:

  • Home expenses - mortgage, rent, and property maintenance.
  • Utilities - power, internet, water and gas bills.
  • Vehicle costs - fuel and oil, car registration, warrant of fitness and mechanic fees.
  • Medical expenses - GP visits, dental care and prescriptions.

Knowing how much these types of expenses are will give you a good baseline for retirement budgeting. Don’t forget to plan for inflation too! Things will get more expensive as you age, putting more pressure on your finances.

Tip 5 - Stay Healthy

Healthy habits formed early on can drastically improve your quality of life as you age. Good health has a significant effect on helping you maintain your independence well into your retirement.

Healthy ageing habits may include:

  • Eating healthy foods
  • Getting Regular Exercise
  • Keeping your brain challenged
  • Cultivating relationships and community
  • Reducing Stress
  • Getting a good night's sleep

By prioritising your physical, mental and emotional health early, you may save yourself and your family money in the long run by decreasing the likelihood of diseases, illnesses and medical conditions. It’s worth noting that you may be eligible for discounts on your insurance premiums for healthy living too.

Tip 6 - Plan for end of life expenses

It may be unpleasant to think about, but part of financial planning for retirement is also turning your mind to planning for what happens when you pass away. What legacy will you be leaving your family? There are a few proactive steps you can take to be prepared now to alleviate any burden on your family when you’re no longer here.

Covering the cost of having a funeral is one thing you can start financially preparing for, either by putting aside money into a savings account, or by, setting up a funeral trust for taking out Funeral Insurance. By setting aside a little bit of money each month towards your policy, an elected beneficiary can have immediate access to anything between $5000 and $15,000, (depending on how long you’ve had your policy).

When you’re planning your retirement, it’s also a good time to check that your will is up to date and record how you would like your estate handled in the event of your passing. Ensure that your family or executor of the will knows where it is kept so that your wishes may be honoured.

Planning wisely for your retirement

There’s a lot to think about when planning for your retirement and the changes it will bring. Make sure the important things are taken care of early, so you can make the most of your golden years.

Help loved ones by investing in funeral insurance with Cigna. With no medical checks, guaranteed acceptance and fast pay outs on acceptance, your family will be able to grieve without worrying about how to pay for your end of life expenses. Get an instant quote today, or have a chat to a qualified Cigna financial adviser about the best cover for you.