Advice matters
The Millennial’s Guide to KiwiSaver

Retirement – it always seems like a long way away, and even more so if you’re in your 20s or early 30s and just starting to dip your toes into a career. But the reality is, you can use all the time you have ahead of you to your advantage, and KiwiSaver is one of the tools in your financial belt.

Here are some KiwiSaver tips from our SHARE advisers to get you on the right track to financial freedom.

Not sure where to start? Start right here

As a 2018 survey by the Financial Services Council found, more and more young Kiwis are relying on the scheme to fund their retirement years and fast-track their home ownership dreams.

If you’re a Millennial, unlike previous generations, you probably feel that the ‘she’ll be right’ attitude no longer cuts it for you. Perhaps, you’re already looking for a strategy – or you haven’t thought much about it yet, but it’s something at the back of your mind.

Our bottom line? It’s never too early to think about the future; in fact, the right time to plan for retirement is always now. And with a few decades ahead of you, you’re in a prime position to achieve your end-goal, one small step at a time.

Speaking of goals…

What kind of retirement would you like to achieve, and how much money do you think you’ll need to fund it?

According to the FSC survey, on average respondents said they would need $754 per week to enjoy a comfortable retirement. On the other hand, they expected to have only $551 per week – it’s an average $205 gap between desires and expectations.

Whatever your ballpark figure looks like, having one is a good start. Get in touch with a SHARE adviser – we can help you identify a realistic target.

How much do you need to save?

According to the 2019 NZ Retirement Expenditure Guidelines, even if you reached retirement with a mortgage-free home, NZ Super alone would unlikely cover any more than a ‘no-frills’ lifestyle, and only outside of the main centres.

If you’re looking for a more rewarding lifestyle after a life of hard work, KiwiSaver (alone or in combination with other investment vehicles) can help you fill in the gap.

Setting up KiwiSaver for the win

  • Not sure where your KiwiSaver money is? – If you’ve never made an active choice of fund, you may not know where your money is invested, nor whether the fund you’re in is appropriate for your risk profile, goals and investment horizon. So the first thing to do is find out your KiwiSaver provider by contacting Inland Revenue on 0800 KIWISAVER or logging in to MyKiwiSaver.
  • Choose a fund that’s aligned with you. – Growth? Balanced? Aggressive? Conservative? The answer depends on your attitude to risk and your investment horizon.
    For example, if retirement is still a long time from now, you may consider a higher-risk fund. The higher the risk, the more likely you are to earn higher returns in the long run. On the other hand, if you’re planning to use your KiwiSaver savings sooner to help with your first-home deposit, you may be looking at minimising your fund volatility with a lower-risk fund. Get in touch – we can help you figure out this important piece of the puzzle.
  • Interested in responsible investing? – KiwiSaver allows you to choose funds that align with your ethics (e.g. avoiding funds that are heavily invested in weapons or tobacco). Again, this is something we can help you with.
  • Choose your contribution rate. The default rate is 3 per cent, but once every three months, you’re free to increase your contribution rate to 4 per cent, 6 per cent, 8 per cent or 10 per cent of your pay. If you like, you can also contribute more than the maximum rate, or make one-off extra repayments. On top of that, if you’re employed, your employer will have to regularly contribute at least 3 per cent to your KiwiSaver.
  • Get your maximum Government contribution of $521.43, every year. – This is one of the undeniable perks of KiwiSaver. Each year, for every dollar you contribute towards your fund (excluding employer’s contributions), the Government adds 50 cents to your retirement savings, up to $521.43. To get the maximum Government contribution, you need to save at least $1,042.86 in the year between 1 July and 30 June. Not quite there yet? You can make a voluntary additional contribution by mid-June, to reach $1,042.86.

Like to talk?
Our SHARE advisers are here to help you make the most of financial planning, now and over time. Get in touch today.

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.