Money
Willfully avoiding retirement planning? You’re not alone
Only 34% of Kiwis have consulted any source of information to work out how to fund the second half of their lives. Do we believe we won’t get older?
By Alex Brooks
New research from Te Ara Ahunga Ora Retirement Commission has revealed more than half of New Zealanders are experiencing financial discomfort, yet only 34% have consulted any information about planning for retirement. I mean, what the?
This not only means most Kiwis are in the dark about how much savings, NZ Super or other government benefits they will need to rely on later in life – they are wilfully choosing not to rewire their financial knowledge to retire.
Why are we being mushrooms: do we think we won’t get older?
Awkward and uncomfortable
I reckon there’s two big reasons we live in denial about planning for how we will fund and enjoy the second half of our life.
- Money is awkward: it carries all sorts of emotional baggage, and New Zealand’s complex rules and expensive financial advice system are failing everyday people.
- Ageing is uncomfortable: all of us are ageist, even those of us getting old enough to know ageing is inevitable.
Kicking retirement planning into gear before we get too old for compound interest to work on our behalf can hold us in good stead.
We need to face the challenge
If we want to stop working on the hamster wheel of the 38-hour week, all of us need to face the challenge of making our accumulated wealth cover our needs and wants over an uncertain number of remaining years.
We will inevitably face variable costs as we age. Think of things like health (hello cataracts and aching joints), aged care (this won’t mean nursing homes for our generation – it will be home services to keep us living in our homes) and paying for the right type of housing as we get older (who wants to walk up 10 flights of stairs if our knees hurt?).
It’s helpful to frame your early thinking about retirement saving as a means to support your critical consumption in later life.
At any age, when we review our financial management and think about what we wish we had known in the past, we should be realistic.
Accessing good-quality information about retirement (whatever that might mean to you) actually improves your income. So do it!
Hidden costs of not thinking about it before you need it
A survey from TRA — which was demographically representative of the population in terms of age, gender, and region — asked respondents which sources of information they consulted concerning their retirement.
Possible sources included professional service providers (like financial advisors), media and social media.
The percentage of people who are worried about level of debt and had consulted each information source was:
- Professional services (financial advisors) — 12%
- Friends and family — 32%
- Bank staff — 15%
- Workplace — 12%
- Groups or discussions on Facebook / other social media — 11%
- Posts / followed content on social media — 14%
Younger New Zealanders were more likely to have consulted informal sources like friends and family, and social media.
People in the 18–34 cohort were 15 times more likely to source advice from social media than people aged 65+, leaving them far more vulnerable to scams involving NZ Super.
The main barrier to seeking professional financial advice is usually the cost associated – usually a few thousand a year – which stops people wanting to engage, learn about or plan for retirement. Although financial advisors are often seen as a reliable source of information, their services tend to be too costly for the average Kiwi to afford.
There are some organisations that offer free or low-cost financial advice, it could be worth contacting them to see what they can do for you. Yes, keep in mind that some services may be biased towards their own income products - but it could be better than not seeking any advice at all. Or not even thinking about it. Just get started. It won’t hurt nearly as much as waiting until later on.
This article was originally published in Alex’s weekly Dueto newsletter: sign up here.
Feature image: iStock/Deagreez
This article reflects the views and experience of the author and not necessarily the views of Citro. It contains general information only and is not intended to influence readers’ decisions about any financial products or investments. Readers’ personal circumstances have not been taken into account and they should always seek their own professional financial and taxation advice that takes into account their personal circumstances before making any financial decisions.
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