Many Kiwis are significantly behind on their retirement savings. Their plan, if they have one at all, is likely to work past retirement age.

Sounds good in theory, but in practice it is a plan that is not on rock solid footing.

Deciding when to retire may not be your decision

A comprehensive US based study found that 72% of people expected to work for pay in retirement, but only 30% of actual retirees did work in retirement.

The study also found that workers on average expect to work much more than they actually do, with an average age of retirement of 62.

This is not by choice for many. In fact, 59% retire involuntary. Not by their choice. Well over half!

Most of the involuntary retirements (58%) citing health issues. The other 32% leaving due to changes in the workplace such as downsizings, company closures, lack of employment, ageism etc.

I know this is a US based study and you may think it has no credence in little old New Zealand. But the way I see it is people are people. We all have health problems. We all experience changes in the corporate world.

Not only that, but New Zealander’s are even worse savers than those in the U.S

Kicking the can down the road is not a plan. You may not even be on the road due to unforeseen circumstances. In fact, there is a better than 50% chance that your retirement date will be involuntary.

There are of course things you can do that can minimise the chances of you needing to retire earlier than you’d like:

• Staying fit and healthy. Of course this doesn’t absolve you from all health related issues, but it doesn’t hurt

• If you are in physical work that is causing damage to your body, think about a plan to transition to either reduced hours or a change in career. Even a change in role within industry such as from labourer to consultant.

• Start a part time second job or business (time permitting), that minimises the impact if you lose one job. If time is a problem, you could turn your main job into part time work so you in effect have two part time jobs. Easier said than done, but an option for some.

• Of course saving sooner is an obvious one. $1,000 less per year spent, could be up to $25,000 less needed for your retirement.

• Finally, planning to only work to age 60 could be a good idea. Then anything beyond that is a bonus. Otherwise, if you plan to work to 65 and retire sooner before you are ready, it won’t work out too well, both financially and emotionally.
  

There is obviously a huge disconnect between people’s expectations and reality, and that is a real cause for concern. It is one thing to not have enough money for retirement and expect it, but to not expect it is far worse. At least with the former you can plan better and be prepared.

With many of the plans I do for clients, I tend to lay on the conservative side of planning. Life happens sometimes and it’s best to give yourself some leeway.

Because if you continue to hold improbable expectations about what the future holds and when you will work until, there’s strong evidence that your health, or some other factor, will prevent you from doing so.

If you need help with your personal retirement planning, then get in touch today.

The information contained on this site is the opinion of the individual author(s) based on their personal opinions, observation, research, and years of experience. The information offered by this website is general education only and is not meant to be taken as individualised financial advice, legal advice, tax advice, or any other kind of advice. You can read more of my disclaimer here