Making your money last in retirement

When you’re retired you’ve already done the hard work of earning, saving, and investing. This period of your life is all about enjoying your freedom, and occasionally checking on your finances to make sure you’re on track.

In this final guide in our retirement series, we look at what you should be considering to make your money last - from withdrawal rates and managing market volatility, to tax, and annual reviews.

Transitioning from decades of building your nest egg to finally living off it is one of the biggest psychological shifts you’ll ever make. It is completely natural to feel protective of the money you have worked so hard to accumulate, but drawing down on your savings does not mean simply parking everything in cash and watching the balance tick down month after month.

Because retirement can easily span 20, 30, or even 40 years, your money still has a long horizon ahead of it. Cost of living increases do not stop just because you have retired, meaning your savings should continue to grow quietly in the background at the same time as you are actively spending from them.

Once you’ve stopped working you’ve got a set amount of money that needs to last you the rest of your life. This can be tricky for a few obvious reasons: you don’t know how long you’ll live, you don’t know how much you’ll spend, and you can’t be sure of investment returns either.

That said, there is research that can point you in the right direction:

According to Morningstar data, the maximum safe draw down rate for retirees in 2026 seeking a consistent level of inflation-adjusted spending from year-to-year is 3.9%. This gives you a 90% chance of your savings lasting for 30 years.

Morningstar explains that (thankfully) most retirees can actually spend more. A withdrawal rate of 5.7% is generally safe for those who are willing to accept adjustments in spending during retirement.

This is American research, but New Zealand rates are similar, with the 4-6% range is often cited for Kiwi retirees.

The lower your withdrawal rate, the higher the chance your retirement nest egg will last the rest of your life. That said this is a balancing act - it’s also important not to have to scrimp and save more than you need to, or spend your retirement worrying about money.

Here are some withdrawal strategies that can help you get the balance right:

Start by setting a safe withdrawal rate, usually somewhere between 4% and 6%, then if your portfolio experiences significant growth (above a predetermined amount) you can increase your spending if you’d like. On the flipside, if your portfolio shrinks in a market downturn, you take a spending cut - usually 5-10% or similar. This is a great way to replace panic when the market is performing poorly, with action and predefined rules.

Your spending amount will need to be adjusted each year for inflation before testing against your upper and lower guardrails.

Retirement typically has three phases, each with different spending patterns:

1. Go-go - highest spending: travel and bucket-list experiences are the priority here. You’re active, independent and healthier.
2. Go-slow - lower spending: you’re still active and independent but you’re slowing down a little. You might do less big ticket spending and focus more on spending time with family.
3. No-go - lowest spending: your focus shifts entirely towards health, comfort, and spending time with family. Travel and entertainment expenses may decrease.

One option worth considering is to change your withdrawal rate to reflect this. For example, you could start at 6% of your total balance, then reduce to 4.5% at 75, then reduce to 3% at 85 (adjusting as you go for actual spending).

Note: the one risk of this strategy is that sometimes later in life retirees need to spend more on healthcare and quality of life related costs. It’s worth keeping something aside just in case.

The bucket strategy isn’t about your withdrawal rate, but rather how you actually draw down on your nest egg.

It involves keeping:

• Money you won’t need for 7+ years in high growth investments,
• Money you won’t need for 3-7 years in balanced investments,
• and the next 3 years of spending money in conservative investments or high interest savings accounts.

The point is, you’re able to keep earning high returns, while reducing the impact of volatility on your nest egg.

Read more about the bucket concept and retirement planning.

There are countless retirement withdrawal strategies to consider. The most important thing is that your strategy is tailored to you. How you invest, spend and manage your money - and ultimately, how you want to live.

One thing that’s worth doing right away when you retire is to check your prescribed investor rate or PIR if you own or plan to buy any PIE-structured funds.

This is a percentage tax rate that applies to all PIE investments, based on your annual taxable income for the past two years (your rate is based on whichever year gives the lower result). MoneyHub has a great article to help work out your PIR rates.

The good news is, if your PIR has changed all you need to do is log into your Kernel account and change your PIR. Read more about how tax works when investing in Kernel funds.

The most honest thing that can be said about long-term investing is that your plan will change, not because you made the wrong choices, but because life happens. A home, children, a career change, an unexpected opportunity, a health event. All of these can shift your priorities and your timeline.

Simply reviewing your finances quarterly or yearly and adjusting if required to whatever better fits your reality. If there’s a market downturn early in your retirement, you might need to adjust your spending downward. If the market booms, you might be able to do the opposite. If you’re spending more than you thought you would, you might need to look at reducing your expenses or sourcing other income.

Whatever you do, the focus should always be on enabling the best possible lifestyle, with what you’ve got.

Kernel Wealth Limited is the manager and issuer of the Kernel KiwiSaver Plan and Kernel Funds Scheme. Product Disclosure Statements for the Kernel KiwiSaver Plan and Kernel Funds Scheme are available at Kernel Wealth | Resources & Documents. Investing involves risk including the possible loss of principal and there is no assurance that the investment will provide positive performance over any period of time. The information provided should not be relied upon as investment advice or recommendations and should not be considered specific legal, investment or tax advice.