MNWPlanning Guide · May 12, 2026 · Rick Parry
The decumulation gap in our retirement system — and four frameworks for closing it
Almost every conversation about retirement in this country is about accumulation. How much should be in KiwiSaver. What percentage to contribute. Whether you're on track. Sorted has a calculator for it. Annual statements project it. The Retirement Commission reports on it. Almost none of that conversation tells you what to do on the day you stop earning a salary. That gap has a technical name, decumulation, and it is, by some distance, the harder problem.
When saving, two big simplifications are working in your favour: a regular income, and time. When drawing down, both go away. A new variable also appears that wasn't there before: longevity risk. The difference between living to 80 and living to 95 is enormous, and neither number is knowable in advance.
The 2022 Review of Retirement Income Policies by Te Ara Ahunga Ora identified decumulation as one of the most significant policy gaps in our retirement system, explicitly noting that “more education is required to support New Zealanders using their savings in retirement.”[1]Their 2024 Older People's Voices research found that many older New Zealanders find the shift from a “saving” mindset to a “spending” one psychologically difficult, and lack the tools to do it confidently.[2]
To help fill the gap, the NZ Society of Actuaries' Retirement Income Interest Group has developed four simple drawdown frameworks, most recently updated in 2023.[3] None is the right answer in isolation. They are starting points for a real plan, which is exactly the point.
| Rule | Method | Trade-off |
|---|---|---|
| 6% Rule | Withdraw 6% of starting balance each year, fixed in dollar terms | Higher early income; no inflation protection; higher risk of running short later |
| Inflated 4% Rule | Withdraw 4% in year one, then increase the dollar amount with inflation each year | More conservative; better longevity protection; lower initial income |
| Fixed Date Rule | Divide balance by the number of years you want it to last | Transparent maths; income varies year to year |
| Life Expectancy Rule | Withdraw based on current life expectancy, recalculated each year | Lasts longest; income reduces as you age |
The 4% rule is so widely cited that many New Zealanders assume it is a universal law. It is not. Bengen's original research was based on US assets only.[4]Pfau's later international analysis found that across global markets, the historical safe withdrawal rate was closer to 3.5%, not 4%.[5] Applied to a typical Kiwi retirement portfolio, globally diversified, paying NZ tax, with NZ-specific cost structures, the planning number changes meaningfully.
There is another wrinkle the conventional rules ignore: real spending tends to fall through retirement. Analysis of NZ retiree spending patterns suggests that typical retirees see real (inflation-adjusted) spending decline by around 2% per year after age 65 or full retirement.[6] A 75-year-old simply travels less, eats out less, and spends less on hobbies than they did at 65, until late-life health costs sometimes flip the curve. A flat withdrawal model misses this entirely.
This is the wrong problem to solve with a calculator on the day you retire. The earlier the modelling starts, ideally five to ten years out, the more choices remain. The closer to the cliff edge, the fewer.
There is no single rule. The right drawdown strategy depends on other income sources (NZ Super remains the most important retirement income source for most Kiwis[3]), housing equity, health, bequest intentions, and tolerance for the bumpier income that comes with more growth exposure.
What can be argued strongly is that this is not a problem to solve with a calculator on the day of retirement. The earlier the modelling starts, ideally five to ten years out, the more choices remain open: fund mix, contribution rate, whether to take on part-time work, when to draw down equity. The closer to the transition, the fewer of those levers are still available.
New Zealand has built one of the world's better accumulation systems in KiwiSaver. The next decade of policy and planning conversation needs to turn toward what happens next.
By Rick Parry, Certified Financial PlannerCM
References
All content is general in nature and does not constitute personalised financial advice. My Net Worth Limited (FSP 1012016) is a Financial Advice Provider licensed and regulated by the Financial Markets Authority. A copy of our disclosure statement is available on request and free of charge.