2023 is just around the corner – which means you’re one year closer to your KiwiSaver goals.
With some of that new year’s motivation going strong, now can be a good time to set the stage for the next 12 months. What would you like to achieve with your KiwiSaver plan? Here are some key things to think about, to make the most of this tool.
I’d like to… buy my first home
The first key question to consider is what your primary KiwiSaver goal is at this time – be that retirement or a first-home purchase. And if you’re planning to withdraw your KiwiSaver savings to boost your home deposit, it’s crucial to set up your KiwiSaver plan accordingly.
Generally speaking, if you’re planning on purchasing in the next 12 months and your money is invested in a higher-risk KiwiSaver fund, you may want to consider reducing the risk profile until you buy your first home. This could help protect your hard-earned savings from wider fluctuations in value.
As a KiwiSaver member, it’s also a good idea to check if you’re eligible for a First Home Grant: there are specific income, contribution, property and deposit requirements to meet. Get in touch to learn more about how to use KiwiSaver for your first home, and what the potential impact would be on your longer-term goals.
I’d like to… be on track for retirement
If retirement is your primary KiwiSaver goal, then it’s a good starting point to determine how much money you may need to fund your future lifestyle. And it’s never too early to find that ‘magic number’.
How much you’ll need depends on how and where you plan to spend your ‘golden years’ – maybe travelling, picking up a hobby, and so on. Of course, it’s not easy to budget for current expenses – let alone those that you might have 20, 30 or 40 years from now. But there are rules of thumb that can be used to gauge an estimate.
One of the most straightforward ones suggests replacing 70-100% of your current income in retirement, with the replacement income coming from NZ Super as well as other retirement funds like KiwiSaver. For example, if your current take-home pay is $1,136, you need to aim for a weekly retirement income of $795-$1,136, including NZ Super.
Like to know if you’re on track? Get in touch. We can help you work out how much you may need and what adjustments you can make to get there.
I’d like to… maximise my KiwiSaver savings
You’ve probably heard that share markets were extremely volatile in 2022, due to a number of factors including uncertainty around inflation and central banks’ interest rate hikes.
But unless you’re looking at using your savings for your first home, your KiwiSaver plan is a long-term investment tool. So, rather than focusing on the short-term gains you can make, it’s essential to consider the long-term returns you can achieve.
With this in mind, the key thing is to select a KiwiSaver fund with the risk level that you’re willing and capable to take. In other words, a fund that’s aligned with your risk profile.
Your risk profile is determined by how comfortable you feel about money losses, and most importantly, how long your investment horizon is. The longer your investment horizon, the more risk (short-term uncertainty) you can generally expose yourself to, because you have longer to ride out occasional share market declines. Plus, a long investment horizon means you have more time to grow your savings through ‘compounding returns’.
On the other hand, if your KiwiSaver fund is too low-risk for your profile, you may miss out on significant growth opportunities. Not quite sure what your risk profile might be? As always, don’t hesitate to contact us: we can help you determine that.
Lastly, don’t forget that getting the maximum annual Government contribution is another key way to maximise your savings. Each KiwiSaver year (1 July – 30 June), for every dollar eligible members put in their account, the Government adds an extra 50 cents to their KiwiSaver savings, up to a maximum of $521.43. You get this ‘bonus’ from the first dollar you contribute in the year, but if you’d like to get the maximum amount, then you need to contribute at least $1,042.86 by 30 June.
We’re here to help
Whatever your KiwiSaver goals are, don’t hesitate to contact us. We can help you set up your KiwiSaver plan in line with your objectives.
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 developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.
