The gap between income and expenditure for New Zealand retirees continues to shrink, but rising housing and household utility bills mean most Kiwis’ superannuation payments still don’t cover their costs of living, says a leading consumer finance academic.
Massey University Deputy Pro Vice-Chancellor Dr Claire Matthews says the latest Retirement Expenditure Guidelines, produced annually by the Westpac Massey Fin-Ed Centre, show that housing and household utility bills are the most significant cost for retirees, as well as the expenditure category that has increased the most over the past year.
For the 12 months to June 30 2016, Statistics New Zealand calculates costs associated with housing and household utilities jumped 3.3 percent, against a rise in the overall Consumer Price Index of just 0.4 percent.
Dr Matthews says that increase will have had a considerable impact on retirees, especially those living alone.
“Housing and household utility bills make up 24.2 percent of the basket of goods used to calculate the CPI,” she says.
“However, for retirees living alone, the Guidelines show this category actually makes up between 26.3 percent and 29.2 percent of their total expenditure – so any increase has a disproportionate effect on their cost of living,” says Dr Matthews.
“So while superannuation payments went up last year by more than the CPI, in line with the increase in average wages, most retirees will still need additional income – even for a very simple lifestyle.”
Dr Matthews says costs like rates and power bills are unlikely to decrease any time soon, and the growing number of retirees renting rather than owning their own homes is also likely to ensure a continuing difference between the level of superannuation and most retirees’ actual expenditure.
Westpac’s GM Consumer Banking & Wealth, Simon Power, says that while it’s never too late to start preparing for retirement, getting a head start on saving can really pay off.
“The Centre’s data suggests a single person living in Auckland, Wellington or Christchurch would need savings of at least $101,774 to make up the gap between superannuation payments and a basic level of household expenditure,” Mr Power says.
“If you start saving at 50, you would need to save $127 per week to achieve that by the time you turn 65. Start saving at 40, and that reduces to $72 per week.”
Read the NZ Herald’s coverage of the Westpac Massey Fin-Ed Centre report.