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Is KiwiSaver enough for your retirement goals?

When KiwiSaver rolled into the New Zealand psyche more than a decade ago, it transformed the way many New Zealanders thought about the prospect of their post-work lives, helping people create a nest egg for their future.

But is KiwiSaver enough to achieve the retirement lifestyle you’re envisioning? What other options are available alongside it?

The incentives

The big drawcard with KiwiSaver is that, if you’re an employee, you may be entitled to an employer contribution equal to 3 per cent of your salary. Some employers contribute an amount that’s higher than 3 per cent, even though they don’t have to.

Even if you’re self-employed, it may be a good idea (depending on your circumstances) to sign up and contribute at least $1042.86 of your own money between 1 July to 30 June each year. This way, you will secure the maximum Government contribution of $521.43 a year.

Do you need to save more?

While those incentives are great, in many cases saving only the minimum amount is unlikely to give you a large enough lump sum to enable you to carry on in a similar lifestyle once you’ve retired.

That’s particularly true if you’re planning to withdraw money for a first home and have to start retirement saving again later in life. Many people decide that means they need to accelerate their savings.

But will you put the extra into KiwiSaver, or something else?

You have a few options with your additional savings. You could choose a different investment asset entirely – residential property is an old favourite for many New Zealanders.  Some buy businesses. Or you could go for a managed fund that works like KiwiSaver, but without the lock-in rules.

As you know, KiwiSaver money is tied up until the age of eligibility (currently 65). So one of the benefits of diversifying your retirement strategy and channelling extra savings into a different, non-KiwiSaver fund is that you can tap into it when you need it – maybe if you want to retire early. That flexibility might also give you the confidence to put aside more than you might if you knew you weren’t going to be able to access it in any circumstances.

On the other hand, that locked-in aspect can be a big help to some people, particularly if you’re not the best at saving. If this sounds like you, you may instead opt to bump up your KiwiSaver contributions, knowing that you won’t be able to touch it.

There are lots of contribution options for KiwiSaver and it’s relatively easy to change the amount you put aside each payday.

Like to talk it through?

There are positives and negatives about every approach, so it’s important to give it some thought to determine the best strategy for you.

If you’re not sure what the right way forward for you is, get in touch today. We can help you think about the benefits of a range of retirement planning strategies, and get set for the future you deserve.

 

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.

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