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US investors targeting $1.5 million retirement savings; so where does this leave Kiwis?

It may come as somewhat of a shock to many Kiwi savers to hear that their US counterparts, in a recent survey on retirement readiness, felt they needed $1.5 million to live off in retirement.

Square that against the average USD$88,4000 they have saved in their 401k accounts (their version of KiwiSaver), and then contrast that with the average (mean) NZD $28,000 Kiwis have in their accounts, and $1.5 million will seem totally out of reach if not fanciful and impossible.

According to the CNBC article, the how-much-do-you-think-you’ll-need figure has jumped 53% since 2020 when survey respondents estimated they needed $951,000. It was also up 15% year-on-year.

Blame it on the cost of living and inflation. Either way, it is a massive leap and a savings amount that would undoubtedly blow many Kiwi savers’ minds.

Some might accuse the media of hype and or fund managers for pushing their cause, but financial experts quoted in the piece offered some sage advice, which I 100% agree with.

No “magic number”

John Roland, a certified financial planner and private wealth advisor at Northwestern Mutual’s Beyond Financial Advisors, said the “number itself should not be the emphasis.”

Roland said the figure, however provocative, best serves as a starting point for a broader conversation on making “clear, competent decisions in that phase of your financial life when you’re distributing money versus when you’re accumulating money.”

Here here!

When it comes to retirement savings, a one-size approach does not fit all. Just as every individual is unique and different, so are their financial circumstances.

Family wealth, debt, fiscal responsibilities, unforeseen events like divorce and lay-offs, relationship status, geography, will all influence how much you need to live off in retirement.

Comparisons and benchmarks are helpful only to the extent that they motivate someone to question their personal circumstances, lift the hood on their accounts, and check how they’re tracking for 65, or whatever age they plan to retired.

Roland, and many other financial experts working in this space argue that the personal saving rate is a better figure to fixate over. Again, the rate will depend on a whole tonne of factors that are personal to you.

On that front, the minimum saving rate for KiwiSaver here in NZ is 3% personal plus 3% employer contributions. That pales compared to the 12% in Australia. To be fair, they’ve been at this game a lot longer than us.

The generally accepted figure is around 10% in most OECD countries.

To be fair, once again, KiwiSaver was introduced to New Zealanders only in 2007. Congress passed the law to introduce 401ks back in 1978. Its neighbour Canada, first introduced RRSPs (Registered Retirement Savings Plans) in 1972.

As a result, in North America, the United Kingdom and Australia, there’s been an industry built up around how best to save for retirement with Government incentives to help.

So back to that savings figure….

Remember that in KiwiSaver, you can optionally select 4%, or 6%. 8%, and 10%.

To receive the maximum Government contribution of $521 a year (this is the carrot they dangle here), you need to have contributed a minimum of $1,043 during the KiwiSaver year, which runs July 1 June 30th each year.

Are you there yet? Check with your provider and or IRD

For that reason, some experts suggest there is no benefit to contributing more than the 3% minimum to get the extra $521. But what many do not hear after that tidbit of info is that experts further suggest channelling your savings somewhere else that would yield the same, if not a better return.

The benefit of saving outside of KiwiSaver (whether that’s an investment portfolio you constructed yourself, a managed fund, or a residential property) is that it is more flexible.

You can access your funds before age 65 if you need them.  Ironically, the same argument supports the case for using KiwiSaver to channel discretionary savings. For many, it is far too easy to raid potentially leaving you short in retirement.

One size does not fit all. There are plenty of options if you are naturally restrained and know you won’t raid the saving funds outside of KiwiSaver. But if you can’t trust yourself to keep your hands off the honey pot, then KiwiSaver is a suitable means of protecting yourself, from yourself.

For those lost in the conversation, here are a few starting points to bring it back to basics.

  1. Check your current KiwiSaver balance and review the settings.
  2. Determine how much total debt you have, if any, and when you can reasonably expect to pay it all off.
  3. Consider other financial obligations that could slow down your savings rate, such as kids’ tuition, holidays, big-ticket items, and even health factors down the road.
  4. Use’s retirement planning tool to cost out your obligations and to estimate how much you’ll have in your KiwiSaver account by 65 and what that will amount to on an weekly basis, with and without NZ Super

Most KiwiSaver providers have calculators on their websites that will give you a ballpark figure on your ‘terminal’ amount at age 65. They also show you what you’ll likely receive, factoring in inflation, every week with or without NZ Super.

You can also play with the settings to see how much difference a higher contribution rate or a different fund type would make. If you’re not convinced, try changing your fund type from a Conservative fund to a Growth fund and increasing the contribution rate from 3% to 10%.

Remember, the fund type you are in should be appropriate for your circumstances, including things like age, time frame for retirement and risk tolerance. has a handy tool to help you sort that one out, too.

Above all, do not panic. Remember you have options whether they’re apparent to you at the moment is another matter.

If you’re dramatically short of what you expect to have (or want) in your account at age 65, they are many ways to skin the cat.

Sure, you may not want to downsize the house, move cities, take another job or consider working past 65, but all of this will help bridge the gap. You shouldn’t be scared of these either by the way.

There are many examples of folks who have done just that and found those changes worked out for the better, and not just financially.

For me, having a choice over how we spend our time, where and with whom is the Holy Grail of retirement.

To that end, salvation is found in early retirement planning and building up your knowledge bank alongside those  portfolios.


Note: The information above should not be construed as personal financial advice. For personalised financial advice, please consult an authorised advisor.


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