The Retirement Commission has introduced a free-to-use navigator, Sorted, to assist with retirement financing and budgeting.
A groundbreaking new Sorted tool has been released to help New Zealanders nearing or already in retirement feel more confident about their financial future and how to plan for it.
Launched by Te Ara Ahunga Ora Retirement Commission, the retirement navigator is free to use on sorted.org.nz.
Working out how to turn a saved lump sum into a steady income to live on in retirement is a financially and mathematically challenging task. Partnering with the Retirement Income Interest Group (RIIG) of the New Zealand Society of Actuaries (NZSA), the Retirement Commission has created a customisable tool that takes care of the calculations.
Based on extensive modelling and drawdown ‘rules of thumb’ created by the RIIG, the retirement navigator addresses a common dilemma, how not to spend too much and run out of money or spend too little and unnecessarily compromise quality of life.
Taking into account people’s invested savings (for example, KiwiSaver) and NZ Super, the tool helps users determine the optimal income they can draw down over their retirement, by adjusting variables such as when they expect their retirement to start and their desired lifestyle, people can see how long their savings might last in different scenarios.
Sorted’s new retirement navigator is the first digital tool of its kind to be built by the Retirement Commission, and the first entirely new Sorted tool in several years. There are currently no other publicly available tools like it.
“There’s a lot at stake for retirees when they start living off their invested savings,” said the Retirement Commission’s Personal Finance Lead Tom Hartmann.
“They don’t get any practise at it, or the option to go back in time and grow that money all over again. There are uncertainties about how long they’ll live, how high prices will rise with inflation, how investment markets will do, and how much all of this will shape their lifestyle. It’s been such a privilege to work alongside the RIIG actuaries and bring their modelling to life to enable people to forward plan. The retirement navigator puts it to real use for pre-retirees and retirees, so they can plan their spending wisely.”
Recognising that retirement takes different shapes and forms, the new tool offers four rules of thumb to match personal preferences and lifestyles:
- The Inflated Four Percent Rule: For those who are concerned about longevity and want to leave an inheritance.
- The Six Percent Rule: For those wanting to spend more in their early retirement years.
- The Life Expectancy Rule: For maximising income throughout retirement.
- The Fixed Date Rule: For those planning to rely on NZ Super after a certain period.
Each option comes with clear guidance and practical solutions to real-life financial challenges.
The NZSA’s Ian Perera, Convenor of the RIIG said it was a thrill to see their work on rules of thumb for drawdown come to life thanks to Te Ara Ahunga Ora Retirement Commission.
“We always hoped people thinking about their retirement would find our work helpful, and the Sorted retirement navigator tool takes it to the next level of access and understanding. Moving from accumulating savings to drawing them down is not straightforward. We admire how Sorted’s experts have embraced our actuarial work while making the retirement journey as easy to navigate as possible.”
Sorted’s retirement navigator tool aims to help New Zealanders:
- Effectively integrate their NZ Super with other retirement savings
- Make more informed decisions about their savings
- Better understand their options for creating sustainable retirement income
- Adapt their spending strategies as circumstances change
- Approach and enjoy retirement feeling less stressed and more secure.
Potential applications include use by KiwiSaver providers and financial advisers throughout Aotearoa when offering tailored guidance to clients and customers.
Although intended for those who are nearing or already in retirement, the retirement navigator can be useful to people of any age who wish to examine how they might best manage their projected savings. Those who are more than a decade away from stopping paid work can forecast how much they’re on track to have by using Sorted’s existing retirement calculator and KiwiSaver calculator.
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