Retirement Close but Haven’t Started Saving? Don’t Panic. Yet.

You’ve had a busy 30+ years of raising kids and working hard, but haven’t made retirement savings a priority. Is it time to panic?

You’re celebrating your 55th birthday when someone jokes about retiring in ten years. You laugh, but you feel uncomfortably nervous knowing you have hardly anything in savings. Maybe you’re a sensible and hard-working ant, but the kids only just left home, they all wanted money for house deposits or education, and you had your financial welfare on hold. Maybe you’re a carefree grasshopper, and have been financially irresponsible and prioritised fun in the moment.

Regardless, now you don’t know how you can catch up and retiring looks like a luxury you can’t afford.

Time feels like it’s running out, and fast.

You’re not alone though, with 51% of the NZ population not actively saving for retirement. And more worryingly, one in five retirees says they have less than a year’s worth of retirement savings that maintains their current lifestyle.

If you’re not in the best scenario, you can take steps to improve your financial situation in retirement. Take control and start your retirement savings today.

1. Eliminate Debt

Debt is costing you money. Getting rid of debt as quickly as possible is key to financial security in the future. This is because the interest payments are costing you money that you should be saving. If you retire with debt, how will you pay it off? That interest and repayments will eat into your superannuation each week.

There are two methods to pay off debt; the avalanche and the snowball.

The snowball method, you list all your debt from smallest to largest. You pay the minimum repayment on all of them except the smallest debt. For the smallest amount, you put as much money towards it as you can. Once that’s paid off, start the next smallest debt. This method is great because it gives you psychological wins that reinforce your debt-reduction plan.

The avalanche is when you list the debts with the highest interest rate amount first. You pay the minimum on everything, but put as much as possible on the high interest debt (such as a credit card). Psychologically, this isn’t as rewarding as the snowball method, but the total interest paid may be significantly less.

Whichever method you choose, pay off debt as quickly as possible.

2. Create a Budget and Stick to It

Here at Smart Adviser, we normally advise creating budgets that have freedom and room to have fun. But at this stage, you may need to aggressively decrease your expenses and really tighten your belt.

Find all your income sources and identify every single expense. Utilities, mortgage/ rent, fuel, everything. Determine what is a ‘need’ and what is ‘nice to haves’ or ‘wants’. Your goal is to trim those expenses. Do you need all those streaming services? Are you on the best internet plan? Do you need to look at your insurance and holistically make a better plan?

A good start is by having a ‘no-spend’ month where you don’t pay for anything except the essentials. You’ll see which expenses are needed and which ones you can do without.

3. Increase Contributions to KiwiSaver

You should be contributing to KiwiSaver already, at least 3%. This gets your employer and government contributions so you’re ensuring others add to your savings too. But now, look beyond the 3%. The hard truth is that you’ve proved you can’t save for yourself, so slide your contributions up to 8%  or 10% (the maximum) and put your money away safely with KiwiSaver before it even gets to your bank account.

4. Save, Save, Save

All that money you’re saving from your aggressive cost cutting can be funnelled straight into savings. Consider this paying yourself first. This is an investment in your future; don’t skimp now, no-one has ever regretted saving money.

Consider a low risk conservative investment fund, as the returns should be higher than a bank account. It also puts the money a little bit further out of your reach, which can be helpful in keeping it locked away until you need it in ten years’ time.

5. Increase Your Current Income

Side hustles or passive income streams can help complement your income. Do it right, and it will keep supporting you long into retirement too. Can you join the gig economy and work as a contractor as a writer, designer, or some other skill you have? Can you monetise a hobby, use your experience to start consulting, or invest in real estate? The options are endless but you have to find the way that works best for you.

6. Create a Plan With a Professional Financial Adviser

This is going to be hard work. There’s no other way to do it; you need to save, and fast. Find a great financial adviser who can help you cut costs, relentlessly pay off your debts, and find some ways to increase your income.

The longer you put this off, the less time you have for assets to grow and interest to add to your savings. Contact us today at Smart Adviser. We can help you structure a plan, kick-start your retirement savings, and help keep that panicky feeling at bay.