What changes how long retirement money lasts?

Start with the part that cannot run out

Most conversations about this begin with a balance and a spending figure and divide one by the other. That is the wrong shape for the problem, because a large part of what you spend in retirement is paid by someone who never runs out of money.

A year of spending

The gap, drawn from savingsThe government pension, for life

New Zealand Superannuation, the Australian Age Pension and United States Social Security are all paid for life. They stop when you do. Whatever share of your spending they cover is not a claim on your savings at all.

So the real question is not how long your money lasts. It is how long the gap lasts: the difference between what you want to spend and what arrives from the government each year. Halve the gap and you roughly double the life of the savings, which is a much larger lever than most of the ones people reach for first.

The size of that gap differs enormously between the three countries, because the payments are built on different foundations. New Zealand Superannuation is paid on age and residence and "doesn't depend on your income or your assets", so it is a floor that does not move. The Australian Age Pension is tested on both income and assets, so the floor rises as your savings fall. United States Social Security depends on your own earnings record, so the floor is whatever you built.

How long you need it for is longer than you think

Almost everyone plans against the life expectancy number they have heard, and almost everyone has heard the wrong one.

Based on death rates in 2022-2024, Stats NZ puts period life expectancy at birth at 80.1 years for males and 83.5 years for females. That is the figure in general circulation.

It is not the figure to plan with, and Stats NZ says why in one line: "life expectancy increases further for each additional year we live."

Life expectancy at birth includes everyone who dies young. Each year you live puts more of those outcomes behind you, and the remaining average moves out. Stats NZ's own worked example makes the size of the shift plain:

a 55-year-old female born in 1971 can expect to live to around 88 years based on high death rates, 89 years based on medium death rates, and has a good chance of celebrating her 90th birthday based on low death rates.

Around 89 against a headline figure in the low eighties. That is five or six extra years of spending, and for a plan built to the wrong number it is five or six years of nothing.

Then the second point, which matters as much. Stats NZ is careful about it: "Life expectancy indicates the average length of life. It does not indicate how long a specific individual will live."

An average is the middle. Planning to it means planning to run out at roughly the moment half of people are still alive. That is a choice a person can make deliberately, and it is not one most people realise they are making.

What prices do over that long

Inflation is normally argued about as a rate. It is easier to see as a total.

Stats NZ found that average weekly household expenditure "increased 18.4 percent in the four years since the year ended 30 June 2019". Four years, and the same household's weekly outgoings were nearly a fifth higher.

A retirement of the length described above is six or seven of those four-year stretches. Nothing about that sequence has to be unusual for a fixed amount of money to buy substantially less at the end of it than at the start.

There is a softener, and it is the reason the first section matters. Government pensions in all three countries are adjusted over time, so the part of your spending they cover moves with prices to some degree. The part that comes out of your savings does not, unless the savings grow enough to do it themselves.

And retired households do not buy the same things as everyone else, which is why the average rate is only an approximation of your own. Stats NZ found health spending rising 18.5 per cent over the same four years, and health is the one category that takes a larger share of the budget the older a household gets.

What returns do, and separately, when they do it

Two different things hide under the word returns, and the second one is the one nobody is told about.

The rate. Money left invested keeps working, which is why the choice between a steadier fund and a more volatile one does not become irrelevant on the day you stop working. What "risk" means in that choice is measured and published, and it measures volatility rather than the chance of running out.

The order. This is arithmetic rather than a finding, and you can check it yourself. While you are saving and adding money, the order in which good and bad years arrive makes very little difference to where you end up. Once you are drawing money out, it makes a great deal of difference, because a fall early on is applied to the largest balance you will ever have, and every dollar you withdraw during it is a dollar that cannot recover.

The same set of annual returns, in a different order, produces a different outcome for someone withdrawing. That is why the few years either side of the day you stop working get treated as a category of their own.

What you are allowed to take, and when

Two rules can take the decision out of your hands.

Before the access age, the money is not yours to spend, or not without a ground or a price.

And in the United States there is a rule at the other end. From 73, "you generally have to start taking withdrawals from your IRA, SIMPLE IRA, SEP IRA, or retirement plan account". Required minimum distributions are a floor under your withdrawals rather than a ceiling, they are taxable as they come out, and they exist whether or not you need the money that year. Neither New Zealand nor Australia has an equivalent forced withdrawal from a KiwiSaver or an accumulation super account.

The number that is not published

The one people want is a withdrawal rate. Take this percentage a year and the money will last.

No published figure was found. Not from the Financial Markets Authority, not from the Australian regulators, not from any United States agency. No government in these three countries publishes a rate it says is safe.

The reason is visible in everything above. Such a number would have to assume a lifespan, a rate of inflation, a rate of return, an order for those returns to arrive in, a pension entitlement and a spending pattern, and it would be published for people who share none of those with each other. The well-known rules of thumb are all somebody's assumptions, and the assumptions are the whole answer.

What can be said without inventing anything is where the leverage sits. The size of the gap. The length of time you plan for. How the first few years go, and how much you take out during them.

What this guide does not tell you

It does not tell you how much you need, and it does not contain a rate.

It does not cover annuities or any other way of turning savings into a payment for life, which changes the shape of this problem rather than solving it.

It does not cover aged care, which is the largest single thing that can happen to a late-life budget, or the tax on withdrawals, which differs by country and by account.

And it does not model your own case, which is what the tool this site is attached to is for.