CASE STUDY: Balancing Retirement Saving with Lifestyle (Frank & Mandy)

Frank and Mandy were in their early fifties. The kids were gradually leaving the nest and their mortgage was no longer a major expense.

 

The couple were planning their annual overseas holiday and Frank thought it would be nice if his parents came along this time. To his surprise his parents declined the invitation telling Frank they just couldn’t afford it. Their savings were running down and NZ Super barely covered their living expenses.

 

Frank had no idea how much NZ Superannuation was worth and was surprised to hear it was only $592 per week for a couple ($30,781 net per year).

 

Right now he and Mandy were spending their combined income of $150,000. Even without the mortgage payment Frank couldn’t imagine existing on $30,000 per year.

 

They came to see a Saturn Portfolio adviser for some much needed retirement planning and decided to aim for a net income of $70,000 per year including NZ Superannuation. This would allow them to maintain their lifestyle when they both stopped working.

 

Frank and Mandy were both in KiwiSaver and we calculated the likely end value of their schemes. We then established how much the couple would need to save pre-retirement to meet their income goal.

 

As their mortgage payments were fairly low they decided to start their savings programme immediately.

 

Frank and Mandy left the meeting with the following plan:

 

Increase their mortgage payments with a view to paying it off within eight years.

 

Begin saving $1,000 per month into an actively managed, diversified portfolio.

 

When the mortgage was paid Frank and Mandy would increase their savings by the amount of the mortgage payments.

 

They left the meeting knowing that if they stuck to their plan they could meet their goal of a more prosperous retirement without sacrificing too much of their current lifestyle.