Being old is more costly than ever according to new research.
It shows people's savings when they retire will have to be higher than ever to make up for the insufficiencies of NZ Super.
The research is titled Retirement Expenditure Guidelines, and is done every year by Massey's New Zealand Financial Education and Research (Fin-Ed) Centre.
The research divides retirement lifestyles into two main groups.
One of these is called "no frills", and refers to people who endure a basic standard of living with few luxuries or even none at all.
The other category is called "choices", and involves people with a more comfortable standard of living, and enjoyments such as trips to the movies.
The distinctions are then broken down further into metropolitan and provincial residences, and further, into one or two-person households.
The report shows that in the past year, the gap between NZ Super payments and the cost of living is wide and getting wider across all these groups.
The report author, Associate Professor Claire Matthews, says New Zealanders need to consider the changing economic environment to determine the savings they need to achieve for their old age.
“While inflation has fallen compared to 12 months ago, it’s still higher than recent experience and cost of living remains a big issue," she says.
"Most New Zealanders aspire to a better standard of living in retirement than can be supported by NZ Super alone......so regularly reviewing retirement plans is a must.”
The figures produced by Matthews and her team show the pension is not enough in all circumstances.
Not even a single person, living "no frills" in a rural area can get by on the pension alone. This lifestyle has sometimes been described as a man living alone, eating baked beans, in Eketahuna.
The cost of doing so would be $689.54 per week, well ahead of the single-person pension at $496.37 per week. The lump sum required at retirement to meet this cost is $197,000, assuming life expectancy of 90.
For a couple, living the "choices" lifestyle in the big city, the difference is much greater. These people are sometimes characterised as an active couple, living a full life in Ponsonby, who enjoy holidays, trips to the theatre and a daily latte.
For them, the weekly cost of living is $1665.85, far higher than the pension for a couple of $763.64 a week. The lump sum at retirement to fund this would be $831,000.
And the challenge is growing, with the difference between the pension and actual expenditure increasing from last year to this year by a margin that varies from $39.20 a week to $87.70 a week, depending on the category.
All pension rates are based on a tax code of "M".
Matthews says the figures show households forced to rely on other incomes, or on drawing down their savings and/or investments to bridge the gap.
"The key inflationary drivers for superannuitants over the last 12 months include food, recreation and culture, housing and household utilities and insurance for all household groups," she says.
Matthews adds food remains one of the largest expenditure classes for households, accounting for 12 to 22 per cent of total expenditure. The Consumers Price Index (CPI) increase for food was 12.3%, more than twice the overall CPI of 6%, and as a result, food was a notable contributor to increased expenditure, making up 35% to 43% of the total increase.
And insurance accounted for 6% to 9% of households’ total expenditure.
We welcome your comments below. If you are not already registered, please register to comment
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.