Podcast: Real Data: Real Numbers About How Kiwis Are Planning For Retirement | Ep. 250

Posted by Ed McKnight on 20/05/20
Real Numbers About How Kiwis Are Planning For Retirement 001
Listen to the Show

Listen to the Show

Show Notes

What's Covered in the Show?

In this episode, we reveal real aggregated data from the retirement plans of Opes Partners clients. This gives you the chance to peer behind the curtain and get a sense of how other Kiwis are planning for retirement.

Key figures include:

The median desired retirement income is $100,000 The median age of a retirement planner (in the sample) is 41.5, with a median retirement age of 65 Given a median life expectancy of 90, that means that the average person has 23.5 years until retirement to make enough money to live for 25 years in retirement.

We also mention our upcoming property investment webinar, which is happening tonight at 7pm. If you are keen to attend, then click here. Or, click here to watch the replay (once it's live)


Transcript of the Podcast

Ed McKnight: Hello and welcome along to the Property Academy podcast. I'm your host, Ed McKnight, and I'm Andrew Nicol, and today on the show, we're drawing back the curtain and we're going to give you some real data about what real Kiwis want in retirement and the state of their retirement plans.

Now, we're in a unique position to be able to do this because as part of our process, we create retirement plans for people and we help build out property investment plans that help people sort their retirement.

And so what I've done today is I've gone into the backend of our system and I've pulled out the last 50 odd retirement plans that we've created with our clients, and we're going to, I'm going to kind of quiz Andrew within this to talk about, well, what income do, what's the average income that most regular Kiwi couples want in retirement.

How old are they now?

When do they want to retire and what age do they anticipate that they're going to kick the bucket?

And I think this is really interesting. I enjoyed pulling this data together, not just because I'm a data nerd, but because I think all of us are really interested in what everybody else is thinking and what everybody else is planning.

And so I hope that this is going to be really useful and interesting as we kind of dive into this data. And, because Andrew spends so much time with clients, I'd expect his guesses about what the median or average income is that people want, I'm hoping that they're going to be quite accurate, but Andrew doesn't have this data in front of him.

I've calculated it this morning, so I'm going to run through it. So Andrew, let's start with one that's not related to income. What do you think is the median, and it's actually quite similar to average, but they are different metrics, what do you think that the median or the average age of a client who wants to pull together a retirement plan now is what do you think the average age is of people starting to pull together retirement plans?

Andrew Nicol: So, I reckon that the average age is 45 I'm just going to go with roundish numbers, 45.

Ed McKnight: You're not far off. It's 41 and a half. So you're three and a half years off, but not bad. 41 and a half and actually have these 50, if you've been along to one of our recent webinars you'll know that I am in love with distribution, so not just what's the average, but what's the range as well, and how is that distributed?

The minimum age was 27 over the last 50. That's the youngest person we've worked with. Oldest person 66. So I think that's really important.

People often say, well how old is too old to put together a property investment plan. You know, I can tell in the last 50, you know, we've had property coaches working with people who are 66.

So I think that's really interesting. And you've got that wide range of almost 40 years in there. So average age 41 and a half, but minimum 27 years old, maximum 66.

Now let's talk about the annual desired retirement income, and we're going to go with median in this case, because the average, I will tell you is slightly biased up based on some people want wanting really, really high annual incomes in retirement.

So what do you think the median every day, New Zealand couple, how much do they want in retirement on an annual figure do you reckon?

Andrew Nicol: I'm going to say that the median is 75,000 a year.

Ed McKnight: No, it's not. In this case, it's 100 K. So that's about $2,000 a week, or obviously about, you know, 8 K odd a month.

Now, what's interesting though, and actually this is something that I often think about is, if you took off tax, it probably would be 75 K so it depends whether you are talking. I'll give you the benefit of the doubt Andrew.

Andrew Nicol: I was definitely talking net.

Ed McKnight: Yeah, I'm sure you were. But what I would say within this, while I think a hundred K probably is a realistic number that a lot of Kiwis who are ambitious because, you know, if you're putting together a retirement plan, you're probably wanting to walk away with a decent annual desired income or annual passive income that you're going to be living off in retirement.

But I would say as well, a few of the models that we put out kind of have a hundred K as not a base, but as one of the desired options. So, you know, we often talk about having a 50 K lifestyle, a 100 K lifestyle, or a 200 K lifestyle. So there could be a little bit of, I guess, leading the witness there, potentially within this data, you know, in terms of people selecting that because it's one of the options, but there is some wide variation within this.

The minimum income, desired income that somebody had wanted when we were putting together a retirement plan was basically 41 and a half K, the maximum was 400 K. So there were a couple of people who wanted 150, 400, 200 K. So that's why the average is about 125 K. But the median, which I would guess in this case, is really kind of the true average is more like a 100 K is that average of everyday New Zealanders.

But what is really interesting as well is when we start to talk about what age do people want to retire, and within this as well, how many years, is do the average number of people, average people have until retirement.

So let's first of all talk about the desired retirement age. What do you reckon at the median in this case, it's close to the average, the average desired retirement age is Andrew of the last 50 people we've seen?

Andrew Nicol: I'm going to say 65 because that seems to be the, the general, do you want me to do the age that they'll live to as well at the same time?

Ed McKnight: Now I want you to, yep. So I'll take 65 as the desired retirement age, but what I want you to guess is how long does the average couple have until they retire, until they expect to retire?

Andrew Nicol: Okay, well then, if it was 41 before, 41 and it's 65 then it's 24.

Ed McKnight: Yeah, it's about 22 just where the data's come out, but it's pretty good. But why I think that's interesting and is that everybody, or not everybody, but the average person, and by far it was 65 the majority of people are saying, I want to retire at 65 and I've got about 22 years until my retirement.

However, I think it is highly likely that over the next 22 years, the age of superannuation or retirement entitlement, is likely to go up over the next 22 years. I think that's highly likely.

But what's interesting is that a lot of people are setting their expectations, not on the fact that their retirement age is going to move, but that what the retirement age is right now. And I just think it's really interesting that we're setting our expectations on what the rules are today, not what they're likely to be in the future, and I'm sure this is a conversation you have as well.

I'm not sure if you've got any comment on that, Andrew.

Andrew Nicol: Yeah. I do sort of say to people that they're unlikely, if they're 20 years out from retirement, to be able to access their KiwiSaver at the age of 65.

So they might want to think about other ways to generate an income before they have the ability to access that KiwiSaver, because as we know, it's controlled by the government.

If government extends the retirement age, then you can't access that until they tell you that you can.

Ed McKnight: And of course the reason we're talking about this, just to recap, is that nobody wants to invest in property, or I've never meet somebody who just wanted to invest in property for property's sake.

And we know there are four main reasons people want to invest in property.

Retirement is often number two, the first being passive income. But that's often, quite related to retirement as well. So that's why we're kind of talking about, you know, the annual desired income, what we should be aiming for, the level or number of years in retirement and some of these things, because we've got to remember why we're doing this in the first place.

Now, what's really interesting as well, Andrew, is years in retirement, and I guess life expectancy comes into this. So if we know the average person wants to retire at 65 on average, what would you say is the average years in retirement.

And I guess within this, the life expectancy and, the numbers are sometimes slightly different from just simple calculations, being able to add one average on top of the other, because median is obviously different than average, but by give us the average life expectancy and a years in retirement.

Andrew Nicol: So I'm going to guess 90 is the average, and I'm going to guess that 25 years, therefore is the number of years in retirement.

Ed McKnight: Yeah, pretty close. The life expectancy was median 90 and a years in retirement is between 25 and 30 in there. But what I find is really interesting, and I'd love if you've got some ideas around this as well, is that we said the average time until retirement that somebody has is 21 and a half years.

But the average years in retirement in terms of median is 29 and a half years. And so what I find interesting just within that is that that you've got eight years less to plan your retirement and get yourself set up for retirement than the number of years that you're going to have in retirement.

So you've got 21 and a half years to prepare for your retirement, but then you're going to have 29 and a half years in retirement.

And I guess this just kind of makes in my mind quite clear that you'd have to make some quite I don't want to say tough decisions, but you're going to have to make some very clear decisions in order to be able to create that annual desired income, that income that you want within those 21 and a half years so that you can live well for those last 29 and a half years.

So you're going to potentially have to make some bold decisions in order to be able to have those 29 and a half years living in some reasonable comfort.

Look, I hope this has been really interesting as well because I always find it fascinating when you kind of pull back the curtain and see what everybody else is thinking.

And I remember back to probably episode like 25 or something of this show where we were talking about the fact that the commission for financial capability came out and was talking about how nobody in New Zealand talks about money.

But what I love about this is we can kind of pull back the curtain and collectively say, well, this is what aggregated together, 48 New Zealanders are actually thinking about their retirement and their money and what they're going to plan for, and hopefully this is going to give you some really interesting insight or sense of what people are planning or what other regular New Zealanders are planning. So you can kind of see where you fit within that.

Now, of course, you don't have to be the average yourself or the median, you know, you can fit within any one of those ranges or even outside as well. But it is just interesting to use that as a basis of what are actually people really thinking.

Now let's wrap it up there, but please don't forget to rate, review and subscribe to the podcast.

It really does help us get the message out to more and more people and hey, tonight we have our very last weekly webinar. After this, we're going to go monthly, but Andrew's going to talk about the lessons that he's learned from owning 38 different investment properties and what strategies you can actually use to keep track of your portfolio after settlement.

Thanks for listening to the Property Academy podcast. I'm your host, Ed McKnight, and I'm Andrew Nicol, and we're going to be back again tomorrow with even more daily strategies, tactics, and insights to help you get the most out of the New Zealand property market.

Until next time.