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Q.        I am now 60 and have just over $45,000 in my KiwiSaver account. Apart from a mortgage-free house and $20,000 in bonus bonds, that is all the savings I have. If I keep working and contributing at my current rate of 3% to age 65 how much will I have in KiwiSaver, and how much help will it be to me? I live alone and earn $62,000 per annum.
 
A.         You are wise to be thinking about this while you still have 5 years of earnings left to you. In fact it is never too early to sit down and work out how much you can afford to put aside, either for your retirement or for any other financial goals you may have.
 
I note that you have paid off your mortgage and saved $20,000. Currently you will be bringing home over $900 per week (after tax and your KiwiSaver contributions) so with a bit of work on your budget you should be able to save $200 to $300 per week. You may think that is unrealistic, but NZ Super will pay you around $367 per week and unless you start saving seriously now you will have to adjust to a much lower income when you retire. If you transfer the money you have in bonus bonds into a high interest savings account it may grow to around $24,000 by the time you are 65 and can be set aside for home maintenance, a car upgrade or other essential expenditure. 
 
The Sorted website is a good place to go to as there are calculators both for KiwiSaver and for retirement planning.   By their reckoning, if you continue at your current level of KiwiSaver contributions you will have nearly $80,000 in your KiwiSaver by the time you turn 65. This will give you an extra $87 per week on top of NZ Super (if you live to 90 - which is what is expected of women of your age).  
 
It is a good exercise to sit down and work out just how much you will need to live on week to week once you retire. If you increase your KiwiSaver contributions now to 8% (that’ll be just $60 more per week) you may have about $100,000 in your KiwiSaver account by the age of 65. While 8% is the highest level of contributions you can make through your salary, there is no limit to the amount you can contribute directly by direct debit through your KiwiSaver fund manager. Alternatively, you can save surplus income into a bank savings account which, unlike KiwiSaver, can be accessed easily. 
 
For many, selling the family home and moving into something smaller is an option to free up funds for retirement. Unfortunately, it doesn’t always work as planned. The increasing popularity of Hawkes Bay for retirement and the number of baby boomers with the same idea may put pressure on the type of property you’d be looking at, and along with the cost of moving you may find there’s not much left to top up the coffers.
 
When you turn 65 there is no magic wand that will suddenly make it easy for you to manage on 50% of what you are currently earning. While it is nice not to have to watch every penny, you don’t want to get look back and wish that you’d been just a bit more frugal during your working years. 
 
Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free of charge by calling 870 3838 or go to www.peak.net.nz. The information contained in this article is of a general nature and is not personalised. Send your KiwiSaver questions to shelley.hanna@peak.net.nz
 
HB Today 3 February 2015