KiwiSaver
Dive into the ins and outs of KiwiSaver for New Zealand’s elderly. Learn how to access and manage your funds wisely after retirement
Launched in New Zealand, KiwiSaver offers a structured way for individuals to save for their retirement. Members contribute a portion of their income, matched by employer contributions, and receive annual incentives from the government. Apart from retirement, it can also be used for first-home buys and a few emergencies.
At the age of 65, members gain full flexibility over their funds, enabling withdrawals to continued contribution. However, it is important to note that government contributions cease post-65, and while employers might continue to contribute, they’re not obligated to do so. Multiple options, from phased withdrawals to investing in other avenues, offer members strategies to maximise their savings’ potential and cater to their unique financial goals.
What happens when you turn 65?
Upon reaching the age of 65, you have full flexibility on what you do with the fund. At this age, members have the liberty to withdraw any or all of their funds, remain a part of the KiwiSaver scheme, or even choose to opt in and out. Even if you’ve never been a part of KiwiSaver before, joining post-65 is a viable option.
Such flexibility ensures you get the full potential of KiwiSaver. However, it is worth noting that post-65, the government contributions cease, and employer contributions may also come to a halt. That said, the KiwiSaver Scheme continues to stand as a regulated and diversified investment opportunity with a competitive fee structure, offering several advantages to its members.
While employers are no longer mandated to make contributions to KiwiSaver accounts post-65, some may choose to continue. If your employer is among those who persist with the 3% contribution, it would be prudent to reconsider halting your contributions or opting out of KiwiSaver. After all, these continuous contributions equate to a 3% salary increment, and the best part is, the funds remain accessible whenever needed.
As for withdrawals, members are presented with an array of options. Regular withdrawals can be set up, with a minimum of $100 monthly, or you can opt for lump-sum withdrawals, starting at a minimum of $500. Each withdrawal necessitates some paperwork. For those contemplating complete or significant withdrawals, it might seem tempting to redirect these funds to savings or term deposits. While this may be suitable for some, in periods of low interest, it’s essential to weigh the missed opportunities for potential growth. To withdraw from the funds you should contact your KiwiSaver provider. Please note it can take a number of days to make a withdrawal.
What to do with the money
You are free to do whatever you want with the KiwiSaver money. It was taxed when you originally earned it, so there is no further tax applied to it. It is possible that this is the most money you will ever have in your account, so be wise and consider the future. Below are some ways that people use their funds:
One practical approach is to first settle any outstanding debts. After clearing these, you can then withdraw the remaining balance in lump sums, providing an immediate reservoir of funds.
If you are not keen on immediate retirement, you can choose to extend your working years beyond 65. This allows you to continue contributing to your KiwiSaver account, enhancing the fund’s growth potential.
A phased approach is another strategy. By withdrawing your KiwiSaver money in stages and adhering to the 4% rule, you can ensure a steady stream of income while reducing the risk of depleting your funds prematurely. 4% rule is taking 4% of your investment each year. This will typically ensure that it doesn’t run out. Depending on the fund it actually may grow. Also the 4% gets a little bit more as it should be 4% plus inflation, so 4% the first year then 4% * 10% + 4% (if inflation was 10%).
For those with diverse investment portfolios, it might be appealing to let the KiwiSaver remain untouched while living off other investments. This ensures that the KiwiSaver continues to grow and serve as a backup.
Lastly, life doesn’t always fit into neat boxes. It might be beneficial to combine several of these options, moulding them to best address your immediate financial needs and long-term goals.