New Rules of Thumb to help Kiwis spend their retirement savings

For older New Zealanders, knowing how much of their nest egg they can spend each year and how much to save can be a worrying process, with unknown future investment income rates and uncertainty about how long they will live.

To help with this issue, the New Zealand Society of Actuaries is proposing guidance in the form of simple Rules of Thumb to assist New Zealanders to ‘decumulate’ – to decide how much of their retirement savings to spend each year.

The Rules of Thumb have been specially developed for the unique retirement environment in New Zealand and are intended as easy-to-understand tools to help retirees work out how much of their savings they can spend each year, depending on their lifestyle goals and their desire to leave an inheritance.

The Rules are not the only guidelines retirees should consider, but they could form a basis for making informed decisions about decumulating retirement savings. They help retirees to think about longevity risk and investment risk without being too technical.

They apply particularly to Kiwis retiring with modest to moderate retirement savings, but even those with more tucked away could find these Rules of Thumb helpful.

“The Rules are a guide to help retirees plan the level of income their savings can support, so they don’t run out of money too soon or leave too much behind, in line with their personal priorities,” says Society president, Andrea Gluyas.

The use of Rules of Thumb has been recommended internationally, but each retiree’s circumstances are different, so no Rule is best for all retirees in New Zealand. The Society believes that Kiwi retirees could be most helped, and confusion minimised, if a single set of Rules is referenced widely.

The Society’s Retirement Income Interest Group tested several possible rules for a typical retiree in New Zealand, modelling future investment returns and life expectancies in New Zealand’s unique retirement environment.

The Group proposes a set of four Rules of Thumb.  Considering these four Rules relative to each other will help retirees in New Zealand to consider which might be most suitable, depending on their preference for income now or later, certainty, risk and leaving an inheritance.


The four Decumulation Rules of Thumb are:

  • The Six Percent Rule:  Each year take six percent of the starting value of your retirement savings.
  • The Inflated Four Percent Rule:  Take four percent of the starting value of your retirement savings, then increase that amount each year in line with inflation.
  • The Fixed Date Rule:  Run your retirement savings down over a period to a set fixed date – each year, take out the current value of your retirement savings divided by the number of years left to that date.
  • The Life Expectancy Rule:  Each year, take out the current value of your retirement savings divided by the average remaining life expectancy at that time.


Our summary of the report and the full report itself contain further context for the Rules and how to use them.

NZ Actuaries