Debunking five KiwiSaver misconceptions
KiwiSaver is helping millions of New Zealanders save for retirement and purchase their first-home. But some common misconceptions may be keeping some people from joining the scheme, or even make the most their existing KiwiSaver savings.
Here are some examples, debunked.
It’s only for retirement
While KiwiSaver was designed to help people save for their retirement, it also brings other benefits to the table. If you’re looking at buying your first home, you may be able to withdraw your KiwiSaver savings and put them towards your deposit. Plus, eligible KiwiSaver members can apply for a FirstHome grant of up to $5,000 for an existing dwelling, and up to $10,000 for a brand-new home – click here to learn more.
You need to be employed to contribute
You can still contribute to your KiwiSaver investment even if you’re self-employed or unemployed. Joining the scheme and making voluntary contributions (if you’re self-employed) or keeping your contributions going (if you’re self-employed) is a good idea: not only will you grow your savings consistently, but you’ll also receive the annual KiwiSaver government contribution.
Each year, for every dollar you contribute to your KiwiSaver investment, the Government will add 50 cent up to a maximum of $521.43. So if you save $400, you’ll get an extra $200, for example. To get the maximum contribution of $521.43, you need to contribute at least $1,042.86 in the year to 30 June.
It’s too risky
KiwiSaver funds are managed funds - which means all your money isn’t invested in one place, rather, it is spread out over multiple assets to spread the risks. Although all investments come with a certain amount of risk, some fund types are riskier than other, and you can choose which one you’d like to be in based on your risk profile, goals and investment horizon.
Higher-risk funds are more likely to deliver higher returns in the long term, but they’re also likely to be more volatile, so it’s important to choose a level of risk that you’re comfortable with. Keep in mind that if you don’t make an active choice of fund, you’ll be automatically invested in a default fund, whose risk level may not be appropriate for your investment needs and goals. Like to discuss your options? We’re here to help you make an informed decision.
“I’m too old to start now”
No matter what stage you’re at in life, it may still be worth it to contribute to your KiwiSaver investment. For example, even if you start later in life, you may still take advantage of employer contributions (if you’re employed) and annual Government contributions, on top of your own contributions and with the added benefit of compounding interest. Plus, you can keep your money invested even if you’re over 65.
“I could lose money”
KiwiSaver is an investment vehicle, so fluctuations in your account balance are to be expected. Markets go up and down, and there’s a chance you may lose some amount. However, over the long term, your KiwiSaver investment balance is likely to grow – and you’re in it for the long haul. As we said, it’s important to choose a fund with a level of risk that’s appropriate for your risk profile and for your investment horizon. Reviewing these settings on a regular basis is also crucial, so we welcome you to get in touch if you’d like to make sure your KiwiSaver investment is keeping up with your life.
Need help? Get in touch
KiwiSaver can be helpful for some important milestones in life, namely saving for retirement and buying your first home. Whether you’re considering joining for the first time, or would like to make the most of your existing KiwiSaver savings, please don’t hesitate to contact us. We’re here to help, with quality advice.
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.