A word of warning, this is a difficult question to answer simply. Many Kiwis put it into the too hard basket and delay planning for the future. It’s also one of the main reasons that companies no longer offer traditional pensions. For them, it was just too difficult, risky, and expensive to put aside enough for those future liabilities. Any calculation you try to do to figure it out will be filled with uncertainties. How much per year will I need to live on? What rate of return will I earn on my savings? How fast will my income go up during my working years? What will inflation be in the future? How many years will I live in retirement? Will NZ Super stay the same until I am 65?
There are many rules of thumb for what percentage of your earnings you should be saving for retirement. Save 10 % of your take home pay? Save a percentage equal to half your age in the year you begin saving for retirement? Somehow I think that these rules of thumb may oversimplify things. We often start saving slowly and ramp up our savings as we earn more.
Continue reading How much should I be saving?