When it’s time to start spending your retirement savings

There are no set rules on how you use your KiwiSaver money when you retire. However, there are a few important things to consider.

3 minute read

Working to secure enough money for your retirement is hard enough. But what about once you get there? An important part of planning is considering how you’ll navigate the ‘drawdown period’ – that’s the phase of your life when you’re taking money out of your savings, rather than putting it in. You want to make sure you have enough money to allow you to withdraw what you need, without running out too soon.

Of course, everyone’s situation will be different – you might keep working past the age of 65 in some shape or form, or want to stop altogether.  There are no set rules on how you manage retirement spending, but by taking some time to plan, you’ll feel more confident. Here are a few important tips to consider.

Don’t be tempted to access the money if you don’t need it

If you do choose to keep working past the age of 65, it could be a good idea to avoid dipping into your KiwiSaver account. Even better, you could keep contributing to it. This will help build your savings for when you need it later. Just keep in mind there are different KiwiSaver funds, so it’s a good time to make sure you're in the right one.

Know your weekly budget

If you reduce your hours or stop working at 65, you might consider using your KiwiSaver funds to pay yourself a retirement income. This will be in addition to any income you might get from other savings or assets, and New Zealand Superannuation, if you’re eligible. To get an idea of how much you may want to withdraw, try the Sorted retirement calculator. Don’t forget to factor in those big-ticket items like a new car or overseas holidays. You can then work out whether the amount you’re currently saving towards is enough to live on once you retire.

You’ll also need to think about how long you’ll need your savings to last. People tend to underestimate the length of time they’ll live which makes it hard to make the right plan. Your retirement years could well last for more than two decades. 

Look at splitting your money

Once you know how much you’ll need each year then you could split your retirement savings into a few different pots. Some people like to put their short-term funds – the money they’ll be using in the next one to two years – into an easy-to-access bank account and set up a regular ‘income’ payments to themselves. You could consider splitting the rest of your retirement funds into medium (3-5 years) and longer term (7 plus years) lots and keeping these funds invested so you can keep earning returns. It’s important to check your fund choice matches your timeframe and how you feel about risk, and review this frequently – at least every year - to make sure it’s still right for your situation.

Think about simplifying your investments

If you’ve gone into retirement with a number of similar types of investments, like multiple investments in managed funds, you might want to consider simplifying your approach and consolidating to just one or two providers. This can make things easier to keep track of as you start drawing down your money.

While you’re reviewing things, it’s a good idea to look at the fees you’re being charged to make sure they’re not too high. Fees can start chipping away at your balance and are one of the main things you can control with your investments, so make sure you know what you’re being charged.

Think ahead

Once you stop working it becomes harder to increase your savings. That’s why it’s important to plan ahead and make sure you’re using your retirement pot as wisely as you can. After all, you don’t want to be drawing down more than you should and run out too early.

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This article is solely for information purposes and is not intended to be financial advice. If you need help, please contact BNZ or your financial adviser. Neither BNZ nor any person involved in this article accepts any liability for any loss or damage whatsoever which may directly or indirectly result from any information, representation, or omission, whether negligent or otherwise, contained in this publication.

BNZ Investment Services Limited, a wholly owned subsidiary of Harbour Asset Management Limited, is the Issuer and Manager of the BNZ KiwiSaver Scheme. Download a copy of the BNZ KiwiSaver Scheme Product Disclosure Statement PDF 1.1MB, or pick up a copy from a BNZ branch.

Investments in the BNZ KiwiSaver Scheme are not bank deposits or other liabilities of Bank of New Zealand (BNZ) or any other member of the National Australia Bank Limited group. They are subject to investment risk, including possible delays in repayment. You could get back less than the total contributed. No person (including the New Zealand Government) guarantees (either fully or in part) the performance or returns of the BNZ KiwiSaver Scheme or the repayment of amounts contributed. National Australia Bank Limited, the ultimate owner of BNZ, is not a registered bank in New Zealand but a licensed bank in Australia and is not authorised to offer the products and services mentioned on this webpage to customers in New Zealand.

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