This is a simple calculator designed to help you work out how much money you need to have a comfortable retirement. 

Before we start, there are a couple of very important points. 

Firstly, this calculator is designed for people who are not yet retired. So, if you are already retired, this is not the right calculator for you. 

Secondly, if you have a partner, then we need to do a separate calculation for each of you. This means that when it comes to looking at how much income you want in retirement and also what your current investments are, we need to divide those amounts by two to have an amount per person. We do the calculations for each person and then add the results together to get the combined picture. 

So let’s make a start. 

The first thing we need to do is enter your current age. We do that by moving the radio button along the sliding scale. 

Now we enter your retirement age. Your retirement age is the age from which you will be dependent on your own financial resources to top up your pension income. A lot of people are choosing to stay working beyond the age of 65 so enter in an age when you think you will stop receiving income from other sources. 

Next we enter the age at which you are entitled to NZ Superannuation or any other pension. For most people this will be 65 but it could be earlier – for example, if you have a private pension that pays out from an earlier age; or it may be later – for example, if you have emigrated to New Zealand and you have to wait a little while before you are eligible for your pension. 

Now we select your life expectancy. Wouldn’t it be so much easier if we knew how long we were going to live? Most people reaching the age of 65 can expect to live to at least the age of 90. I would encourage you to enter a number here that is somewhere in the 90’s. It pays to be conservative because the worst thing that happen is that you run out of money before you run out of life. So, plan to live a long time. 

Now we look at what income you want in retirement from all sources including your pension. This income should be enough to cover all your retirement living costs. If you are not sure how much you need you should do a retirement budget. As mentioned earlier, if you have a partner, we need to look at what is your desired combined income and take half of that for each person. Let’s take a figure of $40,000. We then enter that on the sliding scale. 

Next we enter what we expect your pension income to be. Under the bar there is a link to the work and income website which will tell you what you can expect to receive as NZ Superannuation income. Choose the rate per person after tax. It’s a fortnightly rate and so we will need to multiply that number by 26 to give an annual rate. Currently it’s about $17,500  per person but it’s reviewed every 1 April. 

The calculator will then work out what is the amount that you need in addition to your pension to give you your desired level of income. In this case it’s $40,000 a year less the pension of $17,500 which means that you need an extra $22,500 from your own resources.

Let’s now look at the investments you have currently. Your investments do not include your home.  Your home is just a place to live. But it does include things like KiwiSaver and any managed funds or bank term deposits. Perhaps you have a share portfolio. You may also have a rental property. If you still have a mortgage on your rental property you should deduct the value of the mortgage from the market value of the rental property and include the net amount. Again if you have a partner, add up your combined investment assets and divide that number by two so that you have an amount per person.

Now we look at the rate of return you expect on your investments. We have two different rates – one before retirement and one after retirement. The reason we have a different rate after retirement is that quite often your portfolio in that stage will be slightly more conservative and could well have a lower rate of return. The important thing here is to allow for inflation. We deduct the rate of inflation off what we expect the investment return will be. For example, if you think your KiwiSaver fund may have a rate of return of 5% after tax and fees then deduct an inflation amount of say 2%, which is roughly the long term inflation rate. That will give you a 3% rate of return after tax, fees and inflation. We reduce this rate slightly for after retirement. 

We’ve allowed for a lump sum for spending at the point of retirement. Quite often people when they first retire might want to buy new car, do some work on the house or go for a big trip somewhere. The amount can be zero if you wish or choose a ball park amount that you might want to spend. 

We also allow for a capital bequest at death, which is an amount of money in addition to your family home that would go to your beneficiaries. It can also be a ‘just in case’ fund in case you live a bit longer than what you estimated. 

Now that we have entered in all this information, the calculator will determine the amount of capital you require at retirement.  It will project forward the value of your current investments. The difference between those two numbers is the amount of additional capital you’ll need at retirement. It will then convert that to an annual saving that you need to make in order to achieve the required capital. 

What we do now is compare that level of savings with what you are currently saving. So enter your current annual level of retirement savings. This will include your annual KiwiSaver contributions. You should add your KiwiSaver employer contributions and tax credits plus any other saving you are doing, for example into a bank account or another investment product. The difference between what your required savings are and what you are currently saving is the additional savings you will need to make an order to achieve your required retirement capital.  

I really encourage you to try some different scenarios. So try different retirement ages, try different rates of return and try different levels of income for retirement and just get a feel for the impact of those changes on the amount that you may need. 

We don’t keep any of this information on the website so you will need to request a copy of your results. Simply enter in your name and email address and a copy will be emailed to you. And don’t forget that if you have a partner, you will each need to do the calculation and add the results together to give the combined picture.