Windfall and Retirement
A windfall is a large, one-time sum of money that arrives outside your regular income. Common examples include an inheritance, the sale of a business, a legal settlement, or a redundancy payout. When a windfall is invested wisely, it can dramatically accelerate your path to retirement.
The key decision with a windfall is how to deploy it. Paying off high-interest debt first is almost always the right move. After that, investing the balance in a diversified portfolio (either through KiwiSaver or separately) allows compound growth to work on a larger base.
A common mistake is assuming a windfall means you can retire immediately. For example, receiving $500,000 may feel like a lot, but at a 4% withdrawal rate it only supports $20,000 per year in income. Combined with NZ Super, that may or may not be enough depending on your lifestyle and expenses.
A windfall of $200,000 invested at age 40 at 5% per year grows to approximately $530,000 by age 65. That nest egg, combined with NZ Super, could provide $50,000 or more in annual retirement income. The earlier the windfall arrives and is invested, the more powerful the compounding effect.
See how this affects your numbers
Run the mortgage calculator to see how windfall and retirement plays out in your specific situation.