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Not enough saved for retirement? Working past age 65 could be your answer

Last week, I wrote about how American savers are now targeting USD$1.5 million for their retirement savings. If you missed it, you can read my blog here.

I expect a few readers sputtered their oat milk lattes onto their keyboards. With average savings (in KiwiSaver) sitting at a humble $NZD28k, that million-dollar nest egg will seem as mystical as a unicorn.

Don’t resign yourself to defeat or an impoverished retirement.  Do the sums first, then figure out a plan.

You don’t need to be a math genius either. ChatGPT-4, however imperfect, is a great tool for scenario planning if your math skills aren’t that great.

You can also use Sorted.org.nz’s savings calculator to reverse engineer what you’ll need.

Enter your desired savings goal, age, time frame, expected returns, and current savings. It’ll spit out how much you’ll need to save weekly to get there. You may have to lower your expectations or get a second job, but at least you’ll know where you stand.

For fun, try MoneyHub’s $ 1 million calculator here. 

If you find yourself short, remain calm and save as best you can.

Working past retirement age could be the answer. It’s already a reality for many retirees here and abroad.

The labour force participation rate of persons aged 65 years and over in New Zealand in the second quarter of 2020 was almost 25 per cent.* I can’t imagine it has gone down in four years but the latest labour market data comes out Wednesday.

According to the US Bureau of Labour Statistics, the share of Americans over 65 working has been growing steadily each year, with the pandemic being the exception. It’s close to 20% now, and experts suggest it’ll keep growing as Americans contend with cost-of-living challenges and savings shortfalls.

 

It’s not all doom and gloom.

A recent article by Bloomberg discusses the benefits to the economy and individual well-being as we entertain an older workforce.

It said retaining more people 65 and older in paid employment could “increase growth by expanding the size of the labour force, potentially boost productivity, and lessen the financial strain from greater entitlement spending.”

It also allows for more comfortable savings that consider the prospect of living longer.

One study (referred to in the article) estimates that delaying retirement by six months is the “equivalent of saving an additional one percentage point of your earnings for 30 years.”

Whether that’s meaningful to you will depend on your spending habits and other factors.

Working past 65 may not thrill you, but returning to work doesn’t mean being chained to a desk from 9 to 5 anymore.

We can thank COVID for opening the door to more flexible working arrangements, part-time work, and consulting, which is far more likely to appeal to older workers who lack the energy or enthusiasm for the daily grind.

There’s also a lot of social upside to semi-retirement; it gives people a sense of purpose and socialisation outside the home. However, retirement can be confronting for one’s relationship and, in the absence of hobbies, grandkids, or volunteer work, dull.

My father, 81, (pictured above celebrating his 80th birthday in Auckland), refuses to let age dictate his work life.

After ‘retiring’ 30 years ago from a career in academia, he started his own business as a consultant and continues to thrive professionally. He has more work offers than he can accept and has no immediate plans to stop any time soon.

He’s lucky, I guess, or maybe just wise because he chose an occupation he finds highly stimulating and rewarding.

He isn’t alone.

Looking ahead, you can expect to see thousands more like him.

According to a Stats NZ report dated July 2022, the number of people aged 65 years or older (65+) living in New Zealand is likely to hit one million by 2028.

Two years ago, there were about 842,000 people aged 65+ in Aotearoa, and the number is increasing by about 80 people a day.

We should be close to or above 900,000 if those numbers were accurate.

The Average KiwiSaver balance for people over 65 is currently around $60,000. If that money stays invested in a Balanced fund, the weekly amount available until age 90 is about $57. It’s hard to go out for dinner for less than $60, let alone survive on that for groceries or bills.

Yes, there’s NZ Super but that’s not much either. On a 30% tax rate, a couple would receive around $650 each a fortnight. You may be okay if you’re a modest spender with no mortgage or rent, but you’ll be watching your pennies.

It’s time we wrap our heads around a very different-looking workforce in the next decade or two.

That silver wave is rising on the horizon like a tsunami.

 

*Source; Statista.com

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