Drawing Down Savings

New Zealanders’ life expectancy is increasing. So is our awareness of making money last as long as we do


In the past, people might have looked forward to retiring so they could claim their nest egg and spend liberally on travel and lifestyle, thinking they may only have about 10 years to enjoy it.

Today, we might spend about 40 years accumulating wealth, then have 30 years in retirement to ‘decumulate’ it, or spread it out. Knowing how to do this can be difficult.

Learning how to give and take

We hear New Zealanders asking more about how they can release equity from their home – either through a reverse mortgage they can spend gradually, or by downsizing and reinvesting the difference to get it earning interest for the longer term.

As KiwiSaver balances increase, it will make more sense to draw down on your final sum gradually and leave the bulk of your fund continuing to earn interest. We expect KiwiSaver providers to offer more advice and options as demand increases.

Overseas, annuities are bought like an insurance policy, and provide a guaranteed income in instalments. We are starting to see more of these products entering the New Zealand market.

An eye on the future

More information on options and tools for decumulation planning are necessary. Advice is vitally important as significant long-term decisions are made on the use of assets in retirement. A better range of product options will help address risks and provide financial security for older people, particularly for those with cognitive decline.

The Retirement Commissioner considers decumulation during her three-yearly Review of Retirement Income Policy, and makes recommendations on how New Zealanders can be helped to decumulate.

CFFC’s website sorted.org.nz also provides guides and tools to help people understand decumulation and make plans for drawing down their savings.