Planning for retirement isn't just about hitting a magic number – it's about understanding what kind of life you want to lead once you stop working.
Earlier this year, the Massey University Fin-Ed Centre released its latest Retirement Expenditure Guidelines. This study surveyed 5,500 existing retirees to understand how much they are spending in retirement and what they are spending their money on.
The survey highlights that the government-provided NZ Super won’t be enough for even a basic ‘No Frills’ retirement. And this really is ‘No Frills’ – with little money for luxuries or emergencies. For a more comfortable retirement, you’ll need to save more. Understanding the kind of retirement you want, is the first step to achieving your retirement goals.
How much do you need in retirement?
Everyone’s retirement looks different, so to capture this, the study divides spending into five buckets based on levels of expenditure. They then provide further detail within two categories: No Frills (the second-to-lowest spending level) reflecting a basic standard of living that includes few, if any, luxuries; and Choices (the second-highest spending level) that represents a more comfortable standard of living, which includes some luxuries or treats.
We’ve looked at the amounts needed for a couple living in a metro area (Auckland, Christchurch or Wellington).
What is a ‘No Frills’ or a ‘Choices’ lifestyle?
A couple living in a metro area would spend around $909 a week for a No Frills lifestyle, versus $1,739 for a Choices lifestyle. Both these categories have seen price increases of 3% since last year; bringing total price increases since 2021 to around 17% – not surprising given the rising cost of living seen in recent years. The higher costs have been particularly acute in areas like food (with weekly spend up around 30% since 2021) and housing related costs (up 37% for single, metro-based No Frills retirees); which has been partly offset in a reduction in spending on items like clothing or recreational activities.
Let’s look at some of the more discretionary categories of spend in the report for a couple living in a metro area under both the No Frills and Choices budgets.
Groceries: No Frills includes an allowance for spending $150 a week on groceries per couple, which as we know from recent trips to the supermarket, doesn’t go that far these days. Choices allows nearly twice that at $243 a week. It’s a similar story with alcohol spend, with No Frills allowing $18 a week, enough for a bottle of wine. Whereas the $35 a week under the Choices lifestyle lets you stretch to a second bottle or maybe something a little bit nicer.
Dining out: No Frills sets aside $51 a week to spend at a cafe or on takeaways – so maybe one outing a week. Choices is not much higher at $67, as rising costs elsewhere appear to have seen a decrease in dining out.
Recreation and culture: This category includes everything from the cost of your TV and Netflix subscription, club memberships, spend on pets, books, and magazines – through to holiday accommodation. This adds $100 a week to your No Frills budget, of which $12 a week is spent on holiday accommodation, so we may see a few more staycations this year. Choices affords you a larger budget of $167 a week, so a lot more to spend on recreational activities, and maybe even allowing for an overseas holiday.
Clothing and footwear: No Frills budgets $7 a week to spend on clothing and footwear, so a few additions to the wardrobe each year. For the more fashionforward, the Choices budget of $32 a week will stretch a little further.
Source: Massey University NZ Fin-Ed Centre: New Zealand retirement expenditure guidelines
No Frills really is No Frills
We think there are a couple of key takeaways from this.
Firstly, No Frills really is No Frills. There is a very limited budget for treats or luxuries, and there won’t be much left over for any emergencies. If your ideal retirement includes meals out and regular holidays – then you may need to rethink how much you need to save. Every dollar you put into your retirement savings now could mean more choices for entertainment, travel and eating out in retirement.
A Choices retirement lifestyle is not extravagant but still costs quite a bit more. It’s not a life of luxury. But it means flexibility to spend on some of the things that keep you busy, provide social contact and make life easier.
Secondly, the survey highlights that single people face significantly more challenges in retirement than couples. Total expenditure for a single person household is only 11% less than a two-person household in metro regions (25% lower in the regions). Yet the weekly superannuation payment is 35% lower for that single person. A single no-frills retiree in a metro region will spend $168 a week above the superannuation payment, versus a $110 for couples. Even the ‘Choices’ level of spending for a single person is only around $90 a week more than No Frills, suggesting single retirees have little capacity to spend more.
NZ Super is unlikely to be enough
Regardless of where you live, or whether you live a No Frills or Choices lifestyle, the average retired household spends more than they receive from the NZ Superannuation payment.
From 1 April 2025 the after-tax NZ super rate (using tax code M) for a couple is $828.35 a week. This is still around $80 a week below the No Frills budget for a couple living in a metro area. This means households will either need other savings, or continue to work to meet their living costs.
This is the difference that an early commitment to retirement savings can make. It can give you choice to live where you want to, go out when you choose, and enjoy the activities you love.
Talk to us
If you have any questions about whether you have the right investment strategy for your retirement goals, you can get in touch with our friendly team – we’re here to help.
