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Retirement: The $200k Earners Who Are Going Broke

There are Kiwis earning NZ$200,000 a year in retirement who are running out of money.

1 November 2021

These people may have hundreds of thousands of dollars invested, but the problem is that they’re not prepared to give up their high-spending lifestyles, says Simon Hepple, a wealth adviser for Pie Funds Management Ltd.

Some of them are eroding their nest egg so fast, they’ll soon be in financial strife.

Hepple says over his career he’s had to break the bad news to many people that they risk running out of savings before they’re 70 – unless they cut their spending to more manageable levels.

“I find that when you earn more, you spend more. As a general rule people live within their means, but in some cases they exceed them.”

He says while they were working, these people spent money on private school fees, frequent overseas holidays, moving to a better area, or renovating their homes.

Then, in retirement, they don’t change their spending habits.

“People that do well and earn NZ$200,000-plus tend to socialise with other people that earn that kind of money,” he says.

They continue eating out several times a week, despite living only on interest and NZ Super. “When their friends are all going to Thailand, they’ll go to Thailand or Bali with them.

I’ve met with people who have got more debt 20 years on than when they bought their first home, despite the fact that their incomes are significantly higher,” says Hepple.

“Before you know it, you’re not earning what you used to and your income is under pressure.”

He says the problem is that some of the wealthy become accustomed to an extravagant lifestyle.

“In retirement, they could be only spending 80 per cent of what they used to spend in the workforce – but that’s still quite a lot to cover through investments.”

Read more: How Much Do You Need to Save For Retirement?

By Brenda Ward

First published 1 May, 2018

JUNO does not contain financial advice as defined by the Financial Advisers Act 2008. Consult a suitably qualified financial adviser before making investment decisions. This story reflects the views of the contributor only. Content comes from sources that JUNO considers accurate, but we do not guarantee that the content is accurate. Simon Hepple is an Authorised Financial Adviser and a disclosure statement is available on request and free of charge at www.piefunds.co.nz.

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