You DON’T need $101k by age 30 to have a comfortable retirement!

18 January 2018

A recent headline from the NZ Herald:

“Want a comfortable retirement? You’ll need $101k by age 30” 

The first paragraph:

“People who want to have choices in retirement will need to have around $100k in their KiwiSaver account by age 30 to be on track, figures from Massey University show.”

No! No. No, no, no, no, no.

The article doesn’t get much better from there.

For example, Claire Matthews from Massey University is quoted as saying that “At the moment it is really advantageous to go into retirement in your own home, mortgage-free”. Accordingly, the article concludes that it’s “better to get onto the property ladder sooner rather than later”. Not necessarily true!

I don’t blame Matthews for this statement. But more broadly, I’m concerned that Massey University’s annual retirement expenditure guidelines, which give specific figures that people need to retire to have a “no frills” or “choices” retirement isn’t especially useful and might, in fact, turn people off from engaging with their financial futures.

It’s kind of like saying that a household with three children between the ages of 5 and 15 needs to have a household income of $60,000 to have a “no frills” lifestyle and $110,000 to have a “choices” lifestyle. This is bananas, because the circumstances, needs, and objectives – not to mention perceptions – of every single household is different!

But going back to the core assertion of the headline (if not the article as a whole).

To expect 30 year-olds to have accumulated $101k for retirement is batty. Some people might do it. But a good portion of 30 year-olds who will be able to retire comfortably have only just finished their education, or the first few years of their career, where incomes are not generally high. Some of them might be newly married and even have children. Some have put everything into buying a home.

Frankly, my wife and I were a long, long way from $101k when we hit our 30s. But we’re on track for a comfortable retirement. To expect people to save money in a linear fashion throughout their entire life is unrealistic.

Building wealth is about playing the long game. You won’t build it at the same rate throughout the course of your life. There are seasons to life and there are seasons to how you build wealth.

A headline like this might get clicks for the Herald. But it’s also likely to make people disengage with their financial futures.

Thumbs down to the Herald for this particular article

But if you’re still engaged, thumbs up to you!

Some related reading:


investing, planning

About the author 

Sonnie Bailey

In his spare time, Sonnie likes telling people that he’s a former Olympic power walker, a lion tamer, or that he is an orthodontist. He is none of those things. In reality, Sonnie is a financial planner based in Christchurch. Through his business, Fairhaven Wealth (www.fairhavenwealth.co.nz), he provides independent, advice-only, fixed-fee financial planning services. Sonnie is a “recovering lawyer”: he has specialised in trusts and personal client work. He has also worked as a financial services lawyer for many years.

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