Retirement Income Gap
The retirement income gap is the shortfall between the income you want in retirement and the income your savings and NZ Super will actually deliver. If you want $50,000 per year in retirement and NZ Super provides $28,000, you need your savings to generate $22,000 per year. Whether your nest egg can do that depends on its size and how quickly you draw it down.
Many people underestimate how much they will need in retirement. While some expenses decrease (commuting, work clothing), others increase (healthcare, leisure). A common guideline is that you will need approximately 65 to 80% of your pre-retirement income to maintain your standard of living.
If you own your home outright by retirement, your expenses are typically lower. Renters need to factor in ongoing housing costs, which can significantly increase the income gap.
Closing the retirement income gap is the central goal of retirement planning. Every dollar you save and invest today reduces the gap in the future. The earlier you start, the less you need to save per month to close it, thanks to compound growth.
See how this affects your numbers
Run the mortgage calculator to see how retirement income gap plays out in your specific situation.