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When I’m 64: making your investments last

Christian Hawkesby of Habour Asset Management.

Turning your retirement nest egg into a reliable income stream requires ongoing investment growth if you want it to last.

Invest, invest, invest for your retirement. But then what? KiwiSaver is more than 10 years old and Kiwis have saved over $50 billion collectively into the retirement savings scheme.

When it comes to actual retirement, the trouble with KiwiSaver is it was designed to accumulate savings, says Christian Hawkesby, head of fixed income and economics at Harbour Asset Management. KiwiSaver doesn’t address the question of how to translate those savings into a regular income stream in retirement to supplement New Zealand Superannuation.


One of the big issues is that the most common age of death has risen over the past 20 years from 78 years to 87 years, says Hawkesby. Research from the Financial Services Council (FSC) suggests that nearly all older New Zealanders have only NZ Super to live on by 10 years into retirement, says Hawkesby. “Outliving your nest egg is one of the key financial risks of retirement.”


Often Kiwis put too little thought into how to buy an income stream to fund retirement and the mechanics of making that money last, says Hawkesby. The FSC research found that many Kiwis plan to downsize their homes to finance retirement. Yet this typically only releases three years of spending power, says Hawkesby.

A common mistake is to spend a chunk of capital released from a home and/or KiwiSaver immediately on retirement for travel or lifestyle spending, leaving too little to live on.

Another wrong turn can be leaving all your capital in cash or placing it in low-paying term deposits, which are likely to get eaten up too quickly over time by inflation.


Even doing nothing needs a rethink. Many Kiwis keep their money in the same KiwiSaver fund they invested in before retirement. Yet the conservative funds most are invested in are designed for conservative people, says Hawkesby, not specifically as a vehicle to generate a reliable income for decades.

“The limitation of conservative KiwiSaver funds is that you’re drawing down a little of your savings every week or month. That’s fine for a time, but eventually your savings could run out,” he says.


Turning your retirement nest egg into a reliable income stream requires ongoing investment growth if you want it to last.

To provide the best chance of capital lasting the distance, it needs to be spread carefully across equities (shares), listed property and infrastructure, bonds and cash deposits. Funds constructed on good research such  as the Harbour Income Fund are designed to make the capital last longer, alongside other retirement income solutions and products, says Hawkesby.

Retirees like certainty and Harbour’s Income Fund is structured to provide a regular distribution of 5% a year. “The objective with the Income Fund and other similar investments is to generate a steady rate of income throughout retirement and maintain the purchasing power of the retiree’s capital,” says Hawkesby. Any capital left on death goes to the investor’s estate.

Annuities are another form of retirement solution designed to pay out a regular income. A common feature of annuities is that they use insurance against you living longer than expected to ensure that you receive a steady income stream for the rest of your life. Whether or not any leftover capital is repaid on death depends on the specific type of annuity used.


Investing in funds specifically designed for retirement removes the need for active choices before dementia or frailty can set in. Planning for retirement and seeking advice early can prevent the need for difficult decisions later on.