Many of us know what KiwiSaver is, but aren’t 100% sure on the details, and how to manage it.
KiwiSaver is a simplified saving scheme. You put a small percentage of your wages away into a fund and this money is topped up by the Government and your employer.
That money is then invested by your KiwiSaver Provider. They choose investments from around the world and try to grow your KiwiSaver money even more. In return, they take a fee. Some providers take more, some take less.
Except in special circumstances - eg, severe financial hardship or as a deposit on your first home - you cannot withdraw money from your KiwiSaver fund until you reach retirement age (currently 65).
If you never specifically chose a provider, chances are your KiwiSaver money is sitting with a ‘default provider’ chosen by the Government (90% of people are in this boat) - Your contributions will be invested in the scheme’s conservative investment fund, low risk = potentially low return. Over a lifetime this could mean missing out on thousands of dollars.
You also need to ensure you are paying the correct tax rate on your KiwiSaver money. We can help with this.
Where it gets slightly more complicated is when it comes time to choose where your money is invested. In a nutshell, KiwiSaver Providers generally offer three-five types of funds. To make things simple, we’ve selected three:
Where you allocate your money is entirely up to you and depends on your circumstances. For example, a young person may be willing to put more of their money in the growth fund, as they want to grow their KiwiSaver as much as possible to use it towards buying their first home. Growth funds are the most risky KiwiSaver investments, but the have the potential to reap the biggest rewards.
You need a KiwiSaver provider who:
Has a reasonable fee structure
Communicates well
Makes it easy to set the correct level of investment risk for your situation
Has a history of performing well in terms of investment growth (although this is never guaranteed)
Talking to a financial adviser will help you assess the right fund options for your unique situation.
If you get your KiwiSaver set up correctly, you could actually double your nest egg in half the time*
*Obviously we can’t guarantee this. But most KiwiSaver funds are doing less than 4% return. This means your money will double every 18 years. But by understanding the different types of risk, and the time you have to invest, an adviser will help you create a unique KiwiSaver strategy. Depending on your circumstances, you could double your money in half the time.