Retirement Withdrawal Sequencing Calculator

Search for advice on which account to spend from first in retirement and you will find a great deal of it, almost all written for tax systems that work nothing like New Zealand's. The overseas version of this question is genuinely important because those systems are built around accounts where withdrawing money is itself the taxable event, so the order you empty them in changes the total tax substantially. New Zealand has no equivalent structure. There is no general capital gains tax, so selling investments to fund living costs usually triggers nothing, and income from a portfolio investment entity is attributed and taxed each year regardless of whether you withdraw a cent. The consequence is that moving spending from one account to another shifts remarkably little, and for a typical retiree the difference is precisely nothing, because the marginal rate on interest and the prescribed investor rate on fund income land on the same number. That is worth knowing on its own, if only to stop people spending effort on a decision that does not pay. The decision that does pay is one most retirees never revisit. Your PIR is based on income in the previous two years, so retiring usually entitles you to a lower rate than the one you have been using, and nothing happens automatically. The rate stays where it was until you tell your provider otherwise, and the annual cost of that oversight is larger than anything sequencing could recover.

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The Question Everyone Asks Is The Wrong One

Which account you spend from first is the standard retirement drawdown question, and under New Zealand rules it barely moves the answer.

On the worked example the marginal rate on interest is 17.50% and the PIR on fund income is also 17.50%. The difference between spending your savings and spending your fund is 0.00%.

That is not a rounding artefact. The PIR thresholds were set to line up with the income tax bands, so for a large group of retirees the two rates are the same number by design.

Why New Zealand Is Different

Overseas sequencing advice exists because those systems tax the act of withdrawing from certain accounts, which makes the order genuinely consequential.

Two features remove that here. There is no general capital gains tax, so a long-term investor selling holdings to fund living costs usually triggers no tax on the gain. And PIE income is attributed and taxed each year whether you withdraw or not, so taking money out of a fund is not a taxable event.

The tax follows what you own rather than what you spend. Rearranging which account the spending comes from leaves that almost untouched.

Worked Example: The PIR Nobody Updates

Income excluding PIE: $39,667.64, comfortably under the $53,500.00 threshold.

Including PIE income: $63,667.64, under the $78,100.00 threshold.

Correct PIR: 17.50%. Both tests pass.

Commonly used instead: 28%, carried over from working years or left at the default.

On $24,000.00 of PIE income that is $6,720.00 of tax instead of $4,200.00, an overpayment of $2,520.00 every year. Left in place for 20 years and reinvested at 5.00%, it comes to $87,492.51.

An Overpayment Is Recoverable, But Fix It Anyway

PIE income now forms part of your end-of-year assessment, so tax paid at a PIR above your correct rate comes back to you rather than being lost.

That is a meaningful protection and it is not a reason to leave the rate wrong. You are lending Inland Revenue the money interest-free for up to a year, every year, and relying on an assessment process to return it. Our PIR overpayment recovery calculator works through what recovering it involves.

Changing the rate takes one instruction to your provider, and it is the highest-value thing on this page by a wide margin.

When Sequencing Does Start To Matter

The gap opens once your income excluding PIE passes $53,500.00, because the marginal rate steps to 30% while the PIR ceiling stays at 28%.

At $59,667.64 of income excluding PIE the difference is 2.00 points. At $84,667.64 it reaches 5.00 points, since the marginal rate is 33% against a 28% PIR.

For retirees in that position the ordering rule is straightforward: spend from the account whose income is taxed at the higher rate, leaving money in the more efficient wrapper to keep compounding. Our PIE savings vs bank savings calculator shows the same comparison for a working-age investor.

Watch The Two-Year Lookback

The PIR tests examine both of the previous two income years, which has consequences in each direction.

The rate you become entitled to after retiring may not apply straight away, since your final working year still counts. And a single large drawing can raise your rate for a following year as well as the current one.

Where a large withdrawal is planned, splitting it across two tax years sometimes keeps you under a threshold entirely. Our early retirement bridge calculator covers the years before Super begins, where income is often lumpier.

Related NZ Retirement Calculators

• PIR Overpayment Recovery Calculator: recovering tax paid at the wrong rate.
• PIE Savings vs Bank Savings Calculator: the same comparison before retirement.
• Early Retirement Bridge Calculator: funding the years before 65.
• NZ Super Rate Calculator: what NZ Super pays.
• KiwiSaver 65 Drawdown Calculator: drawing down the KiwiSaver balance.