When our great grandparents were born, they could expect to live on average for 55 to 60 years and it was likely they would continue working until just a few years before they died. The introduction of Government pensions was intended to provide a means for those who were too sick or too old to work to live a few short years at the end of their lives without financial worry. Of course, what has happened since then is we are now living much longer and healthier lives. At age 65, on average a man can expect to live another 18 years and a woman can expect to live another 20 years. Around half of retirees will live much longer than this.
Pensions were originally designed to do no more than cover the cost of the necessities of life. It was not envisaged they would have to cover overseas travel, healthcare, buying a new car, replacing the carpets and curtains in the house and so on. NZ Superannuation is around $523 a week after tax for a couple, and there is nothing left over for luxuries. If you are one of the lucky ones who live into their nineties, you will spend around a third of your life in retirement. That’s a long time to live in poverty. As a result, many people are now working for several years after becoming eligible for a pension and if this trend continues it is logical that the official retirement age will increase.
It makes sense when you are planning for your retirement to plan on living for a long time and to work for as long as you feel able. Build up enough funds to last you for at least 20 years in retirement so your final years aren’t spent in poverty.