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KiwiSaver: why contribute? 

Rachel Currie

Why am I contributing to my KiwiSaver when I could use the money for other things now? A common question!


Because Kiwis are not very good at saving for our future or our retirement. 

Most KiwiSaver balances across age groups over 65 average less than $60,000(1) and the median net worth for those 65-74 is $433,100(2).  This figure is below the New Zealand Retirement Expenditure Guidelines set out by Massey University, which recommends a $600,000 lump sum for a single-person household to live comfortably and have options in retirement in a metropolitan city ($688,000 for a comfortable lifestyle in the provinces). 


This age group only had 17 years, or less, of KiwiSaver (it started in 2007) before retirement age, which could be a factor in their low balances. The rest of their net worth could be made up of other assets such as workplace retirement schemes, housing, savings, shares or other investments. 60% of current over 65s are relying on NZ Super for the majority of their income in retirement, however, it’s not much to live on. 


NZ Super 2024 rates:

  • Single, living alone: $519.47 per week after tax

  • Single, sharing: $479.51 per week after tax

  • Couple, one person qualifies: $399.59 per week after tax for the eligible person

  • Couple, both people qualify: $799.18 per week after tax combined 


But why does this affect you?


Most of us don’t start thinking about retirement until it’s too late and as home ownership rates are decreasing, expenses in retirement will increase as more retirees will be paying rent. Could you live on the above amount each week? 


At least if you have been consistent with chipping into your KiwiSaver, you will have the start of a retirement fund as it is locked away until 65 (with a couple of exceptions). If you are employed, the contribution is made straight from your pay check so you don’t have to think about it. Also, what will NZ Super look like by the time you reach retirement age? It could be means tested or removed altogether.


KiwiSaver is often our first investment and if we are in the right fund for long enough our compounding contribution and returns should really start to add up. Long term (over 10 years) annualised returns for KiwiSaver categories - aggressive 9.1%, growth 8.2%, balanced 6.7%, moderate 4.8%, and conservative 4.3%(3).


It’s all about delayed gratification and helping your future self. Hopefully, you see the benefits of contributing to KiwiSaver and when you are able to, you start investing outside of KiwiSaver for future goals and retirement. KiwiSaver should be the start of your investing journey.


What to do now?


Check in on your KiwiSaver:

  • if you are employed, get your employers 3% match when you contribute 3%

  • check you receive the government contribution of $521, if you contribute $1042 per year (you can get this if you are employed or self-employed)

  • check what fund you are in - it should match your risk tolerance and your timeframe (https://sorted.org.nz/tools/kiwisaver-fund-finder/)

  • does your KiwiSaver provider align with your values and what are their fees

  • how am I tracking at 65 - https://sorted.org.nz/tools/kiwisaver-calculator/ 


If you need any help with you KiwiSaver - contact me.


(If you are in financial hardship, please find a free financial mentor in your area at https://www.moneytalks.co.nz/)


Reference articles:

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