Around half a million dollars in savings on top of superannuation should be sufficient for most retirees to have a reasonable standard of living, but those in the big cities may need more than $1 million, according to a new study.

The latest Retirement Expenditure Guidelines from Massey University's New Zealand Financial Education and Research Centre show the projected savings needed to live to the age of 90, on top of super payments, has increased.

The report shows a two-person household will need $1.14m for a comfortable city retirement, while in the provinces it will cost $446,000.

A couple living a simpler life in the city would need $120,000, while a rural retirement would cost $252,000, on top of super payments.

The sums, for the year ended June 2024, are based on household spending patterns for various groups compiled by Stats NZ for 2023.

The numbers are generally lower than a comparable survey in 2023, which was based on 2019 Stats NZ data, and reflect slowing inflation and changing spending patterns.

The impact of inflation varied between 1.8 percent and 3.46 percent on the various household groups driven by higher utility bills, transport and insurance, when the official inflation rate was 3.3 percent.

Report author Associate Professor Claire Matthews said some people survived on NZ Super payments alone but most people could not.

"As a result, it's crucial to recognise that the landscape of retirement planning is always changing. Regularly reassessing your retirement plans to account for external factors is essential."

A comfortable retirement was defined as being able to travel, eating out, and higher discretionary spending, compared to a "no frills" approach to life and spending.

Matthews said the slight fall in the lump sums needed on top of superannuation pointed to households cutting back their spending because of inflation, and adjusting their finances to counter a "fear of running out" of savings.

"Rather than keep buying the same thing and paying current prices they've actually reduced their level of spending so they're not doing as much as they were because they don't have the same level of funds to fully cover the cost of inflation."

No sleepwalking to retirement

Matthews said Baby Boomers were no longer the focus of retirement planning, and it was Generation X and Millennials who needed to be planning.

"The focus for retirement planning is undergoing a generational shift, with the first of Generation X now facing retirement in the foreseeable future.

"While Millennials have more time, the first of that cohort are now around 20 years from reaching age 65, making it an opportune moment for them to begin retirement planning," she said.

"You can't just sleep walk into retirement, you've got to plan for it."

Matthews said people should be getting financial advice on their future savings and diversification of investments, so they were prepared.

She supported KiwiSaver being changed to require employers to pay contributions after workers turned 65, raising the minimum contribution rate, and changing rules involving KiwiSaver contributions in total remuneration packages, which disadvantaged lower paid employees.

The chief executive of industry group Financial Advice NZ, Nick Hakes, said the report would help financial advisers to improve the quality of their work.

"The data and insights from the guidelines equip advisers with information on spending patterns and the financial needs of retired New Zealanders, to assist with providing tailored professional advice that addresses longevity risk, optimises savings, and ensures a comfortable retirement."

-RNZ