And then there is inflation too which over 20 to 30 years in retirement can have a nasty effect on our standard of living. What about the big items that wear out such as washing machines, fridges, TV’s and your car which over 20 years in retirement could need replacing 3 to 5 times? I am not sure $761.56 allows for either of these issues.
What does this all mean? NZ government super is $536 a week and most of us will need an extra $300 to $400 per week.
Where will the extra $300 to $400 per week come from?
1/ Investments of say $300,000-$400,000 at 5% PA return = $300-$400 per week
2/ Consuming our investment capital base when the interest and dividends is not enough. This is not a problem as long as it does not run before you do – but be careful – what if you live “too long”?
3/ Rental income from a rental property or a sleep out.
4/ Selling your big home and buying two units – live in one and rent out the other.
5/ downsizing your home – people commonly move house between age 78 and 82 for many reasons and often this will release some cash to generate more investment income, or cash that can be gradually consumed.
Footnote; I wonder how many retired people are living in a great big home with lots of empty bedrooms and yet do not have enough cash invested to provide the extra income required.
Income that requires good health
Don’t rely on your health to allow you to work forever.
1/ Work – yes work – a lot of people work past age 65 and research suggests men in particular prefer to work not only for the money, but also because it is good for their disposition and demeanour.
2/ A home-based business.
3/ doing locum work and relieving – perhaps for your old boss, or the person who bought your business.
4/ Selling goods on Trademe.
5/ Using skills such as woodworking or car repairs / motor mechanic in your garage.
6/ Working part-time /seasonal work in orchards and vineyard.
This is not an exhaustive list of course there are no doubt many other benefits people are using to generate extra income (please feel free to email us if you know of more).
Reverse mortgages which are best left until you are late in life.
Build a granny flat at the back of one of your children’s properties.
The best option
Having a substantial investment portfolio of $200,000 to $800,000 is the best option.
Cash is king and allows you all sorts of freedom.
You still might do some of things on our list above, as some of them will be fun and/or rewarding.
A decent pool of savings will give you options, freedom and comfort.
How to get a good savings pool
Review your position annually
Get independent advice annually