Calculating savings for Retirement

[marsden_online]

Life is expensive and some decades are more costly than others. One of the most expensive is from age 25 to 35.

- Diana Clement: Sensible savings choices pay off big time (NZ Herald)

Starting the post with a tangent - The above article is actually about managing to save and use that money wisely when you are in your younger years. I have a few issues with it - one is that despite the larger range of example couples provided than is usual for such an article we get no feel for their backgrounds / level of societal privilege. None of them seem to have come up from the gutter though, shall we say.

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What I actually wanted to type about was retirement savings. Now that the mortgage has been more-or-less knocked on the head it's time to take a hard look at what I'm going to do with the money that was disappearing into that hole. There are some big-ticket items coming up to do with the house but I want to get some savings put aside first "against a rainy day"; if that rainy day never comes then they will be part of my "retirement" or "post-work-income" resources.

Some simple maths gave me a ballpark figure for how much will be in my Kiwisaver (at minimum input and assuming the 50% government match continues at that level), and the sorted.org.nz calculator agrees with me. I'm reasonably confident that money *will* be available in one form or another; not so NZ Superannuation which I would rather not take if I can afford it anyway.

Based on that, and another 30 years working ("retirement" age 70) Sorted reckons I need to be putting aside about $1000 per month (on top of kiwisaver) for those 30 years to have enough capital to slowly consume over another 35 years after that (the longest life expectancy it will allow). Conveniently that is about how much I have, on average, been putting against the mortgage. Which means assuming my life trajectory doesn't change significantly for the next 30 years and after (comfortable, but lacking family, no significant health issues) I'm pretty set.

Some pretty big assumptions there. So I hope to do better in the short term.

Another thing I noticed is if I took that lump sum and could get say 4% after tax on it, I'd still have about the same $$ income I do now, possibly better. I'm not actually a fan of consuming your capital unless the end is clearly in sight.

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The two best pieces of advice are still
- pay off debt first; especially debt which is costing you interest then debt which might start costing you interest in the future
- the sooner you start saving for retirement the easier it will be. When you are in a position to start saving make sure to split some off in that direction.

And if you habitually live off debt now, please think very very hard about how that is going to work when you are no longer earning the income to service/repay it.