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Are kiwis saving enough for retirement? Preliminary evidence from SOFIEInformation Release

Released 20 Mar 2007

Paper prepared for the 8th Annual SuperFunds Summit, Wellington, 15-16 March 2007

Authors: Trinh Le, Grant Scobie and John Gibson

Abstract

Saving for retirement is an important decision for individuals and couples. The extent to which people are saving for retirement is a key element in formulating public policy toward saving and retirement incomes. Little or no insight into retirement savings can be gleaned from aggregate measures of household saving rates. It is the accumulation of wealth that is the critical indicator. For this information is needed on the assets and liabilities of households. This paper uses new data on assets and liabilities from the Survey of Family Income and Employment. We develop a formal life cycle model of wealth accumulation which allows us to estimate saving rates that people would need to have until retirement age in order to have an adequate income in retirement. We find that significant parts of the population aged 45-64 have made adequate provision. This is particularly true among the lower income groups where New Zealand Superannuation represents the majority of their retirement income. However, some people appear to be saving at rates below that needed to accumulate the required level of retirement wealth. Further work is underway to identify these groups and assess the magnitude of the shortfalls.

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