How to make the most of KiwiSaver
Here are five tips that will get you off to a great start in terms of securing your financial future.
The number of New Zealanders withdrawing money from their KiwiSaver account to help purchase a first home is increasing year on year, and we expect the trend to continue into the future.
4 minute read
You’ve worked hard and saved even harder to get your KiwiSaver balance looking healthy, so it’s not always an easy decision to dip into it when you find your dream home. Will you have enough to retire on tomorrow if you withdraw a lump sum today? What if the housing market crashes? How will you afford to keep contributing to KiwiSaver if you have a mortgage to pay?
There’s a lot to think about, so before you decide to access your KiwiSaver savings to fund your first home purchase, here are some things to consider.
New Zealand’s superannuation system was originally based on the principle that people would own their own homes by the time they reached retirement. However, home ownership can be difficult to reach, and some Kiwis may never own their own home. This means many of us need to save a lot more than initially forecast to take rent payments into account during retirement.
It’s important to note that if you decide not to withdraw funds to buy a home, it doesn’t mean retirement will be easy. The savings you’re currently putting aside may not cover the rising cost of rent in our major cities and so you may need to consider increasing your contributions to give yourself a more comfortable retirement.
By putting your savings into a KiwiSaver account in the first place you benefit from your own contributions, those of your employer, the annual Government contribution and potential investment returns. In contrast, a standard term deposit or savings account only pays interest on your contributions. KiwiSaver is however, a managed fund, which means you invest in a diverse range of investments such as company shares and bonds. Because of this, your savings are exposed to market volatility and positive returns are not always guaranteed, whereas bank savings accounts will generally return the agreed interest rate.
By taking funds out of your KiwiSaver account, you are reducing the savings you had set aside for retirement. But owning a home is still seen as a critical step in being financially secure in retirement, so if withdrawing your funds helps you achieve that goal, is that necessarily a bad thing?
Rather than thinking about your decision as either owning a home or having a comfortable retirement, consider it this way, would you rather invest your money in property, or in a managed fund? Whichever you choose, we’d always recommend you talk to a Financial Adviser so you fully understand both options.
The most important thing to remember is to keep contributing to your KiwiSaver account once you’ve bought your first home. It’s true that owning a home gives you some financial security, but you can’t eat your house so whilst you should focus on paying down your mortgage it’s just as important to keep up with your KiwiSaver contributions.
You’ve got some great savings habits already, that’s how you’ve accumulated such a good KiwiSaver balance in the first place - don’t let those habits slip. You may have to reduce your contribution percentage in the first few years, while you pay down your mortgage, but just don’t stop them altogether.
You may also be entitled to an additional $5000 or $10,000 as part of the government First Home grant. To qualify you must meet strict income and house price caps, and you must have been actively contributing to your KiwiSaver account for at least three years.
Here are five tips that will get you off to a great start in terms of securing your financial future.
If you’re saving for a deposit on a house, find out how much you might need and discover ways to help you reach your goal.
Investing in property has been a popular way for New Zealanders to grow their wealth for decades. But it’s important to know there are also other ways to invest.
This publication is solely for information purposes (and is only for New Zealand residents]. None of the matters in this publication are personalised financial advice. We recommend that you seek financial advice specific to your personal situation and goals. No representation or warranty is made as to the accuracy, reliability or completeness of any statement made in this publication. Neither BNZ nor any person involved in the preparation of this publication accepts any liability for any loss or damage arising out of the use of, or reliance on, all or any part of this publication. The information and recommendations are the personal views of the author and do not necessarily reflect the views of BNZ. Past performance is not an indication or guarantee of future performance.
Advice is provided by BNZ advisers, who advise solely on products or services of BNZ and its related companies.
BNZ Investment Services Limited, a wholly owned subsidiary of Harbour Asset Management Limited, is the Issuer and Manager of the BNZ KiwiSaver Scheme. Download a copy of the BNZ KiwiSaver Scheme Product Disclosure Statement PDF 1.1MB, or pick up a copy from a BNZ branch.
Investments in the BNZ KiwiSaver Scheme are not bank deposits or other liabilities of Bank of New Zealand (BNZ) or any other member of the National Australia Bank Limited group. They are subject to investment risk, including possible delays in repayment. You could get back less than the total contributed. No person (including the New Zealand Government) guarantees (either fully or in part) the performance or returns of the BNZ KiwiSaver Scheme or the repayment of amounts contributed. National Australia Bank Limited, the ultimate owner of BNZ, is not a registered bank in New Zealand but a licensed bank in Australia and is not authorised to offer the products and services mentioned on this webpage to customers in New Zealand.
BNZ Investment Services Limited (BNZISL) uses the BNZ brand under licence from Bank of New Zealand, whose ultimate parent company is National Australia Bank Limited. No member of the FirstCape group (including BNZISL) is a member of the NAB group of companies (NAB Group). No member of the NAB Group (including Bank of New Zealand) guarantees, or supports, the performance of any member of FirstCape group’s obligations to any party.