𝐑𝐞𝐭𝐢𝐫𝐞𝐦𝐞𝐧𝐭: How much & why?

$1m is barely enough - Most will miss that target.

In a recent RNZ article, a KiwiSaver provider, Koura Wealth, suggests that people should aim to save at least $1 million for retirement. Founder Rupert Carlyon explains that the amount needed depends on the desired lifestyle, but it generally falls between $1 million and $2 million. He notes that international research indicates retirees need 70-100% of their pre-retirement income, with significant spending occurring in the first and last ten years of retirement.

For someone earning $120,000 annually, a balanced fund earning 3.5% would require a starting balance of $1.1 million to $1.8 million, depending on the income replacement rate. NZ Super provides $519 weekly for singles and $400 each for couples. Actuaries recommend withdrawing 4% of the investment fund's starting value annually. Massey University research estimates that a single person in a metro area needs $717,000 for a comfortable retirement, while a couple needs nearly $1 million. In provincial areas, the costs are slightly lower.

Retirement Commissioner Jane Wrightson emphasizes the importance of savings and investments for a comfortable retirement, noting that people are living longer. Financial coach Liz Koh suggests saving one-third to half the value of one's home, acknowledging that cities are more expensive to retire in.

An 18-year-old starting KiwiSaver with a $50,000 salary could save about $340,000 by age 65 in a growth fund, assuming no withdrawals for a first home. To reach $500,000, they would need to save 6% of their income or have a faster-than-average income increase.

Retirement planning in New Zealand faces a significant challenge. This recent reports highlight a stark reality: many Kiwis are unlikely to meet the $1 million benchmark suggested as a retirement savings minimum. While other OECD countries have embraced higher savings rates—Australia targeting 11% by 2025, the US at 13.9%, and the UK at 8%—New Zealand lags behind with a combined KiwiSaver contribution rate of just 6%.

For small business owners, the challenge is even greater. Many SME owners see their business as their primary retirement nest egg, expecting its eventual sale to provide the funds needed for their post-work years. However, this strategy is inherently risky and often insufficient. These days, people are living longer. On average, 80% of 65-year-old men can expect to reach 90, while 65-year-old women can expect to live until 94.

The Risks of Relying Solely on Your Business

The industrial-era concept of stopping work completely at 65 is outdated. Today, many people continue working—either by choice or necessity—well into what were traditionally considered retirement years. For SME owners, this can be both a blessing and a burden.

Here’s the crux of the issue:

1. Timing and Value: Selling a business at the right time for the right amount is not guaranteed. Market conditions, buyer interest, and the state of the business all play critical roles.

2. Lack of Diversified Savings: Many SME owners neglect their KiwiSaver contributions, often paying only the minimum required to access government incentives—or skipping contributions altogether.

3. Circular Planning: By relying solely on their business as their retirement asset, owners risk being trapped in a cycle where they invest all their resources into their business but fail to secure a fallback plan for retirement.

At Bolster Risk Management, we understand that your business is your asset, but it’s just one piece of the puzzle. A comprehensive retirement plan considers all assets—including your business—and ensures stability and security for the decumulation phase (the drawdown of retirement savings).

Here’s how we can help:

• Valuation as Part of Your Retirement Plan: We help business owners identify and maximise the value of their businesses, ensuring it contributes meaningfully to their retirement goals.

• KiwiSaver and Beyond: By incorporating diversified savings strategies, such as KiwiSaver and other investment vehicles, we reduce reliance on any single asset.

• Future-Proofing Your Legacy: We work with you to establish a succession or exit strategy that protects your business and secures your retirement.

The hard truth is this: having “busted yourself” to build a successful business, the last thing you want is to find yourself at retirement age without sufficient resources to enjoy the freedom you’ve worked so hard for.

Start planning today. Whether it’s increasing your KiwiSaver contributions, exploring ways to boost the value of your business, or creating a holistic retirement strategy, it’s time to think beyond the here and now.

At Bolster Risk Management, we empower small business owners to protect their wealth, maximise their business potential, and build a legacy that lasts.

Let’s make your business work for your retirement—not the other way around.