Retirement – will you be ready?

I recently read a joint survey by the Financial Markets Authority (FMA) and the Commission for Financial Capability (CFFC) on Retirement

Some key points that came out of the retirement survey:

• “Commission for Financial Capability (CFFC) found only one in 10 of the over 50s felt confident they would have saved enough to have the retirement lifestyle they wanted. Over half of people aged over 50 haven’t yet tried to work out what they need to save by retirement in order to live a decent lifestyle in retirement.”
• “Most over 50s expected to own their own home outright by the time they retired. Nearly half of those who didn’t expect to be in that happy position had not calculated what rent or continued mortgage payments would mean for them.”

In the 50+ age group I typically see 2 groups of clients:

1. The asset accumulators. This group have paid off their home, or are on track to. They have now moved their focus onto maximising what they can do pre retirement. If they are seeing me this is typically around investment properties. They will often have superannuation and may have other investments but that’s not my field.
2. The ‘how do I get mortgage free by 65?’ Typically they have brought a house and the term given to them by their lender will be longer than the years remaining before they turn 65.

The focus is the same for both groups, and that is pay down debt as quickly as possible. A target will help. For group 1 it may be to have two freehold rental properties by 65. For group 2 it may be to be debt free in 10 years time. Once a target has been set it is then relatively straight forward to work out what is required to achieve these targets. For example on top of existing mortgage repayments a further $300 a month will mean the mortgage is gone in 10 years, as opposed to the current 16 years.

Infrequently the desired target may not be able to be met in the desired timeframes. Knowing this is always better then not though as alternatives can then be considered – work longer, downsize or look at ways to change your current income or expenses.

A final comment for the survey;”At 50 years old, when you have potentially 15 years to go before you stop working, there is still time to make a big difference to your lifestyle choices in retirement.”

Don’t  choose to stick your head in the stand, confront where you are and ensure  your retirement  is reached in the best financial position possible.

The information contained in this article is of a general nature and should not be taken as advice. It reflects the opinions of the writer only and does not necessarily reflect the opinions of New Zealand Home Loans.