If you retire at 65, you might have 30 years ahead of you. That is a long time to fund and a lot of life to plan for. Getting retirement right requires thinking in decades, not years.
The New Reality Of Longevity
Life expectancy has increased dramatically. A 65-year-old New Zealand man can expect to live to approximately 84 years, while a woman can expect to reach 87. But these are averages. Many people live into their 90s, and some reach 100. Planning for 30 years of retirement is not pessimistic - it is realistic.
Three Phases Of Retirement
Retirement is not one long phase. It typically has distinct stages with different financial characteristics.
Active Retirement (65-75)
The "go-go" years. You are healthy, mobile, and want to do things like travel, hobbies, grandchildren, and social activities. This phase features higher spending on lifestyle and experiences. This is when you use your savings most actively.
Slower Retirement (75-85)
The "slow-go" years. Energy decreases, health issues emerge, you travel less and stay closer to home. This phase brings lower discretionary spending, but healthcare costs start rising.
Later Retirement (85+)
The "no-go" years. Mobility is limited, you may need care assistance, and activities become simpler. This phase features low lifestyle spending, but potentially very high healthcare and care costs.
Financial Planning For Three Decades
Do Not Spend Too Conservatively Early
Some retirees are so worried about running out of money that they barely spend anything in their active years. They save for later, then later arrives and they cannot enjoy the money. Your active years are precious. Budget for experiences while you can enjoy them.
But Plan For High Late-Life Costs
Rest home care can cost $50,000-$150,000 per year. Dementia care is even more expensive. These costs can rapidly deplete savings. Keep a reserve for potential care needs. Consider whether you could qualify for government subsidies if needed.
Inflation Matters Over 30 Years
$50,000 today will not buy $50,000 worth of goods in 2055. At 2.5% annual inflation, $50,000 becomes worth about $24,000 in purchasing power over 30 years. Your income needs to grow, or your lifestyle will decline.
Investment Strategy Must Last
Conservative investments feel safe, but may not keep pace with inflation over 30 years. Even in retirement, having some growth assets can help your savings last. Work with a financial adviser on an appropriate mix.
NZ Super As Your Foundation
NZ Super provides a stable foundation that adjusts for inflation since it is linked to average wages. Building your plan around NZ Super, supplemented by your own savings, creates more certainty than relying entirely on investment returns.
Healthcare Planning
Health needs change over 30 years. In years 1-10, focus on prevention by staying active, maintaining health, and addressing issues early. In years 10-20, expect more medical appointments, potential surgeries, and vision and hearing changes. In years 20-30, you may need assistance with daily living, potential rest home care, and face significant health costs.
Build healthcare reserves. Maintain insurance if affordable. Understand what the public system does and does not cover.
Housing Decisions
Your housing needs may change across retirement. In early retirement, the family home may be perfect with space for grandchildren and a familiar neighbourhood. In mid-retirement, maintenance becomes challenging and stairs become difficult, so you may want to downsize. In late retirement, you may need supported living or care facilities, and the family home may no longer be suitable.
Making housing transitions while you are capable of managing them is easier than being forced to move in a crisis.
Relationships And Social Connection
Loneliness is a significant risk over a long retirement. Partners pass away, friends move or die, family becomes busy, and mobility limits social activities.
Plan for social connection by joining groups and clubs, maintaining diverse friendships including with younger people, staying connected with community, and considering a retirement village for built-in community.
Purpose And Meaning
Thirty years is too long to just fill time. Retirement satisfaction comes from ongoing projects and goals, contributing to others through volunteering and mentoring, learning and growth, family involvement, and creative pursuits. What will give your retirement meaning? Start building those activities early.
Flexibility And Adaptation
Over 30 years, circumstances will change in ways you cannot predict. Health changes, family situations evolve, economic conditions vary, and your interests and priorities shift.
Build flexibility into your plan by keeping some liquid savings, avoiding locking all your capital into illiquid assets, reviewing your plan regularly, and being willing to adapt.
Having Difficult Conversations
Long retirement means confronting difficult topics. What if you need care? What are your wishes if you cannot make decisions? How will your estate be handled? What do your children and family need to know?
Have these conversations while you can. Document your wishes. Update them as circumstances change.
Starting Now
Whether you are 50 or 70, you can improve your 30-year outlook. Assess your financial position realistically. Build flexibility into your plans. Invest in health to extend active years. Cultivate relationships and community. Find purpose beyond leisure. Plan for care needs that may arise. Have conversations about difficult topics.
Retirement is not the end - it is a significant chapter. Planning well lets you make the most of it.
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