Advice matters
Why get advice before KiwiSaver decisions?

With over 3 million members enrolled in the scheme, KiwiSaver is an important part of New Zealanders’ financial wellbeing. And if you’d like to make the most of the scheme’s benefits, seeking quality advice is a good idea. It’s about understanding how it all works, and most importantly, making it work for you.

So here are some key reasons to get KiwiSaver advice, according to our SHARE financial advisers.

Support and guidance

KiwiSaver, like all investments, can see fluctuations and changes over time. When things get a bit rough and you feel unsure, having support and guidance can go a long way – especially when emotions seem to get in the way of financial decisions. As advisers, we can be a sounding board for all your questions and help you look at the bigger picture.

Understanding how it works

As we’ve seen in the past months, things can change quickly and sometimes sharemarkets see periods of heightened volatility. But remember: unless you’re saving for a first home deposit, you’re in KiwiSaver for the long haul.

When the market takes a sudden downturn, it’s usually a good idea to wait it out. Switching funds at these times may mean locking in your losses, and potentially missing out on the rebound.

Just like any investment vehicle, it’s important to note that KiwiSaver always entails some level of risk. The key thing is to choose a level of risk you’re comfortable with, based on your risk profile and investment horizon.

Generally speaking, there are five risk levels to choose from when selecting your KiwiSaver fund:

  • Defensive – low risk and likely lower returns over time
  • Conservative – low-to-medium risk and likely low-to-medium returns
  • Balanced – medium risk and likely medium returns
  • Growth – medium-to-high risk and likely medium-to-high returns
  • Aggressive – high risk and likely higher returns

In general, the more risk you take on, the more likely you are to get higher returns over time, but you need to be prepared for more ups and downs in your balance along the way.

As KiwiSaver advisers, we can help you have a better understanding of how it works, and choose an appropriate level of risk for your needs and goals.

The importance of making an active choice of fund

One of the key things to know is that currently, if you don’t choose a provider when you enrol, you are automatically allocated to a default provider and invested in a default fund, which may not necessarily be appropriate for your risk profile and investment goals.

Traditionally, default KiwiSaver providers have always been invested in ‘conservative’ funds, which being lower risk, are also likely to deliver lower returns over time. This is about to change: from 1 December 2021, all default members will be put into a ‘balanced’ fund – slightly higher risk, but also the potential for higher returns in the long-term.

As big as this change is, it doesn’t make actively choosing your KiwiSaver fund any less important. If you’re young, for example, or retirement is far away, you may be able to take on a higher level of risk, because your KiwiSaver have decades to rebound from a downturn. On the other hand, if you’re nearing retirement, choosing a lower-risk fund may be an option to protect your hard-earned money.

Understanding the impact of first-home withdrawals

As we’ve seen, KiwiSaver is designed to help New Zealanders save for their retirement years – but that’s not the only benefit of the scheme. In this hot property market, KiwiSaver is helping many Kiwis secure the keys to their first home.

Having said, it’s important to understand the impact that a first-home withdrawal can have on your longer-term goal, which is saving for retirement. The longer your money stays invested, the more you can benefit from the power of compounding interest. So, while buying property makes financial sense, we can help you a clear understanding of the ‘unintended consequences’, and develop a plan to get back on track with your savings. 

Need help? 

If you’re looking for ways to make the most of your KiwiSaver, get in touch today. Our SHARE advisers can help you assess where you’re at, identify where you want to be, and put a plan in place to get there.  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.