KiwiSaver HINTS FOR A BETTER RETIREMENT
Useful KiwiSaver tips, ideas and suggestions to help you enjoy a long and prosperous retirement.
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KiwiSaver Help Articles
- Check your KiwiSaver performance each year
- How safe is your KiwiSaver Top-Up?
How to check your Kiwisaver performance each year
This year we decided not to remind you to top-up your KiwiSaver to ensure you received the maximum Government contribution of $521. Everyone else is. And while it is the last year you will receive that amount (as the Government has halved it), we felt that after reminding you for the last four years - enough is enough.
But, another change the Government announced, is a change to your contributions moving from 3% to 4%. Ideally this extra contribution will help get you over the threshold of $1042 required to get the top-up in future years – so we probably won’t have to remind you again. Even though, many New Zealanders continue to miss out on the free government top-up to their KiwiSaver account each year, as they don’t contribute enough themselves. Despite multiple reminders, almost half of the nearly $800 million Government Contribution allocated each year for the top-up goes unallocated (TV1 news). Hopefully by now, that is not you. What is more important now that 8% of your salary will be going into KiwiSaver (your 4% plus your employers 4%), is to ensure you are in the correct type of fund, and the fund you select is consistently a top performing fund – i.e. a ‘5 Star’ fund. People most at risk here are those that let the IRD or their employer select their KiwiSaver provider. Plus, any that don’t check the performance of their fund on a regular basis. Correct KiwiSaver Fund TypeWith KiwiSaver, there are basically two scenarios when you can access your funds: 1. you want to purchase your first home, or 2. you turn 65 or over. So, working out the correct type of fund you should have is quite simple:
First, estimate the Timeframe you have before the occurrence of one of the two scenarios (i.e. before you need or can access the money)
Next, identify the Type of Fund that matches your timeframe: Timeframe Fund Type (yrs) 2 to 3 Defensive 4 to 5 Conservative 6 to 8 Balanced 9 to 12 Growth 13+ Aggressive
Now check that your current KiwiSaver fund is the correct type. Sign into your Kwisaver Account and check the type of fund you are in (Balanced, Growth etc.). If your are in the wrong type then you need to change it. 'Top 5' FundNext check if your current KiwiSaver fund is listed in the ‘Top 5’ funds based on returns (after tax and fees) over the last 5 and 10 years. Use Sorted's Smart Investor Site and select ‘KiwiSaver’, your current ’Fund Type’, sort by ‘Return (Highest first)’, and see if you can see your fund in the top 5. Alternatively you can check the latest Morningstar Quarterly KiwiSaver report. Download their report then locate your fund (they are presented by Fund Type) and check if they were consistently in the top 3 or 5 positions over the 5 and 10 year horizon. If not, it maybe time to select a fund that was. If you are in the wrong type of fund, or your current fund is not in the Top 5 – you need to change it. Correct Contributions Finally check you are making the correct amount of contributions each each. Although now less important (and income tested) you (and not your employer) still need to have contributed $1,024 each year to receive the Government Contribution while it still exists. Next check your employer contributions. Ideally they are matching what you are contributing - but they don't need to. If you are contributing more than them - and you have any debt - consider reducing your contributions to what they will match and use the additional money to repay debt quicker. Once the debt is repaid, redirect that money into other income generating investments for your retirement.
Why should I check my KiwiSaver fund each year? To ensure you have any chance of funding a meaningful lifestyle in your retirement, you need to use the power of compounding interest and time, to grow your KiwiSaver fund at the best rate possible. With annual contributions (yours plus your employers) growing to 8% over the next two years, you need to fix your KiwiSaver now. Being in the correct type of fund, and a ‘5 Star’ funds will make a greater impact on your retirement than any free money the Government may contribute.
As highlighted in both our free retirement planning guide and Retirement Planning Courses, investing in an ‘average’ performing fund vs. a ‘top’ performing fund (of the same type) over a 20 year investment timeline means you would have $100,000 less in retirement. If you selected (or were placed by default) into the worst performing fund, that could mean you would have $170,000 less in retirement!
Don’t miss out on over $100,000 because you are not prepared to act today.
But, another change the Government announced, is a change to your contributions moving from 3% to 4%. Ideally this extra contribution will help get you over the threshold of $1042 required to get the top-up in future years – so we probably won’t have to remind you again. Even though, many New Zealanders continue to miss out on the free government top-up to their KiwiSaver account each year, as they don’t contribute enough themselves. Despite multiple reminders, almost half of the nearly $800 million Government Contribution allocated each year for the top-up goes unallocated (TV1 news). Hopefully by now, that is not you. What is more important now that 8% of your salary will be going into KiwiSaver (your 4% plus your employers 4%), is to ensure you are in the correct type of fund, and the fund you select is consistently a top performing fund – i.e. a ‘5 Star’ fund. People most at risk here are those that let the IRD or their employer select their KiwiSaver provider. Plus, any that don’t check the performance of their fund on a regular basis. Correct KiwiSaver Fund TypeWith KiwiSaver, there are basically two scenarios when you can access your funds: 1. you want to purchase your first home, or 2. you turn 65 or over. So, working out the correct type of fund you should have is quite simple:
First, estimate the Timeframe you have before the occurrence of one of the two scenarios (i.e. before you need or can access the money)
Next, identify the Type of Fund that matches your timeframe: Timeframe Fund Type (yrs) 2 to 3 Defensive 4 to 5 Conservative 6 to 8 Balanced 9 to 12 Growth 13+ Aggressive
Now check that your current KiwiSaver fund is the correct type. Sign into your Kwisaver Account and check the type of fund you are in (Balanced, Growth etc.). If your are in the wrong type then you need to change it. 'Top 5' FundNext check if your current KiwiSaver fund is listed in the ‘Top 5’ funds based on returns (after tax and fees) over the last 5 and 10 years. Use Sorted's Smart Investor Site and select ‘KiwiSaver’, your current ’Fund Type’, sort by ‘Return (Highest first)’, and see if you can see your fund in the top 5. Alternatively you can check the latest Morningstar Quarterly KiwiSaver report. Download their report then locate your fund (they are presented by Fund Type) and check if they were consistently in the top 3 or 5 positions over the 5 and 10 year horizon. If not, it maybe time to select a fund that was. If you are in the wrong type of fund, or your current fund is not in the Top 5 – you need to change it. Correct Contributions Finally check you are making the correct amount of contributions each each. Although now less important (and income tested) you (and not your employer) still need to have contributed $1,024 each year to receive the Government Contribution while it still exists. Next check your employer contributions. Ideally they are matching what you are contributing - but they don't need to. If you are contributing more than them - and you have any debt - consider reducing your contributions to what they will match and use the additional money to repay debt quicker. Once the debt is repaid, redirect that money into other income generating investments for your retirement.
Why should I check my KiwiSaver fund each year? To ensure you have any chance of funding a meaningful lifestyle in your retirement, you need to use the power of compounding interest and time, to grow your KiwiSaver fund at the best rate possible. With annual contributions (yours plus your employers) growing to 8% over the next two years, you need to fix your KiwiSaver now. Being in the correct type of fund, and a ‘5 Star’ funds will make a greater impact on your retirement than any free money the Government may contribute.
As highlighted in both our free retirement planning guide and Retirement Planning Courses, investing in an ‘average’ performing fund vs. a ‘top’ performing fund (of the same type) over a 20 year investment timeline means you would have $100,000 less in retirement. If you selected (or were placed by default) into the worst performing fund, that could mean you would have $170,000 less in retirement!
Don’t miss out on over $100,000 because you are not prepared to act today.