Fantail-sized nest egg? When life shocks ruin your retirement

Wednesday, 9 July 2025

There is a crunch coming to government finances as Super recipients balloon - but is this really a crisis, or just a matter of choices? This series takes a closer look.

You’re headed toward retirement and then … WHAM!: life shock … you’re redundant, you’re separated, you’re in hospital with a debilitating medical condition.

And so you arrive at retirement without the nest egg you’d planned for, looking at a fantail-sized egg rather than the kiwi-sized one you’d always pictured.

With the onset of inflation, a tighter job market, rapid change in the skill sets required to hold down a job, how do you survive financially in retirement?

It’s tricky, says Te Ara Ahunga Ora Retirement Commission personal finance lead Tom Hartmann. One thing is certain though, New Zealand Superannuation is crucial.

Read Part 1: The coming NZ Super crunch

Editorial: Will Super costs sink us?

While the recently released Sorted Retirement Navigator tool contains a wide range of mathematical and statistical calculations around life expectancy and market return on investment there will always be unpredictable “outliers”, Hartmann tells The Post.

“Relationship breakdowns or career breakdowns are less possible to predict, right? Nobody goes into a relationship thinking, Oh, it's going to break down in my 50s and so I'll get ready for that,” he says.

“Careers too. You think it's going to go a certain way? Of course, it doesn't. Forward planning has its limitations and it’s healthy to say, ‘well, we really don't know how it's going to turn out’, and therefore the role of NZ Super is is under-appreciated.”

Not being able to work means not being able to save as much. Not being able to save as much means less to live on in retirement. The most simple rule of thumb is you spend 6% of your nest egg each year.

So if you have $20,000 saved, you’ve got $1200 in addition to super - or just $23 a week. If your nest egg is $200,000, you have $230 a week more - so $12,000 income from your savings, and $27,000 from super.

Built by the Retirement Commission in partnership with top actuarial brains, the Retirement Navigator simplifies the big questions:

• How long will I live?

• When can I retire?

• How much do I need saved?

• What will that give me weekly?

• Do I burn through it early, or stretch it out carefully?

The tool has been released to help those nearing or already in retirement feel more confident about their financial future and how to plan for it,

And separation is a killer too. A 2023 commission survey found almost every one of 155 interviewed were worse off financially post-separation.

Pre-separation 78% reported they were financially comfortable. Post separation only 35% (one in three felt that way).

Women were worse off than men, with just 31% comfortable post separation (compared to 44% of men).

Retirement plans were rarely factored into splitting of resources, the survey found. While 70% of assets were split 50-50, KiwiSaver was often left outside the negotiations around three times out of four.

Hartmann says NZ Super cushions the pain: “In terms of certainty, the way it adjusts, the way it accounts for longevity risk in particular.

“That whole risk of losing your money, or running out of funds, is covered by that foundation. It really is a foundation for retirement.”

But it’s not much. It would not cover the cost of living for most lifestyles, in most regions - even though there are broad variations in those costs.

But even as NZ Super comes under the political spotlight for how much it costs - and increasingly will cost - taxpayers, Hartmann warns against thinking things are set in stone. People adapt.

“What gets left out a little bit is the collective solutions that people have: joining forces, living together, sharing with family or friends … there are a wide range of living situations.

“All that would mean that Super would provide more of a slice of your income, and be able to cover your costs better.

“People are thinking about these things. We've had so many things changing in our environment today, not only the economy, but also the nature of careers. There's so many things that bring uncertainty with it. So people are wondering, how best do we prepare to adapt?”

Retirement villages have undertaken forward planning, take in the level of Super and offer retirees more of a cushioned environment, he says.

“The overall theme is we underestimate the importance of it for people, and the collective solutions that there can and could be that we haven't yet considered.”

Almost everyone ends up financially worse off post-separation, but women seem to be particularly affected, the commission separation report found.

“Based on our qualitative research, we can attribute this to reduced earning potential for women who typically stepped back from their career while they took on the role of primary caregiver,” the report said.

While equal sharing is the legislative starting point, the Act allows for adjustments to the division based on the contributions of each partner to the relationship.

Contributions can be financial, nonfinancial, or both. This means that if one partner made significant financial contributions to acquire a property, they may receive a greater share of it.

In the report a respondent called “MIa” realised her late-life separation had negatively affected her retirement plans.

Mia, who is in her mid-50s, initiated a separation from her husband of almost 30 years. It was relatively amicable. Their children had left home.

The separation landed on a 50/50 split of assets, including KiwiSaver, which Mia found fair at the time, especially given that she was the one initiating the separation.

“It felt quite generous of him given that I was the one who made the decision to leave. In hindsight, I probably should have gone for a little bit more.

“The division of household duties was more 70-30 and my career was on hold for a good decade to raise our son.

“He’s now earning really good money over in Australia, so for him the separation turned out to be a good thing financially. While my circumstances have changed for the worse.”

She has struggled to find lucrative employment.

“After the divorce, I’ve just wanted to be and live in the moment … And now I’m almost 60. I’m sure I will have to work well into retirement age.”

Other respondents faced similar uncertainty.

“I haven’t even thought about this. I love my work, I love working, always have done, never stopped.” Female, 56, separated two years ago.

“I haven’t really thought about retirement. With my recent health issues, my main concern right now is to live until my girls are 18.” Male, 55, separated two years ago.

“I don’t have any retirement plans. It would actually be great to get some advice on this.” Female, 61, separated six months ago.