Thinking about retirement
Retirement might look like it’s a long way off, but it’s still worth thinking about today. Let’s look at how NZ Super, KiwiSaver, and investing can help set you up for your golden years.
NZ Super is a start
Every New Zealander can get NZ Super when they turn 65. Not a bad deal, really—it’s roughly $400 a week (depending on your tax rate, living situation, and relationship status).
Work and Income has all the info you need to know about applying, and the amount you might qualify for.
KiwiSaver keeps you saving
Even if you’re not keeping an eye on it, your KiwiSaver account might already have some retirement savings built up in it.
KiwiSaver is a voluntary savings scheme that you can join through either a KiwiSaver provider (if you’re under 18) or when you start a job.
Contributions are made automatically when you get paid (3% of your pre-tax pay is the default rate, but you can opt for as high as 10%). Your employer also contributes at a rate of at least 3%. And if you’ve contributed at least $1,042.86 in a year, the government will contribute $521.43 too.
Typically, these contributions are invested by your KiwiSaver provider into an investment fund with a particular investment timeframe and risk profile—like conversative, balanced, or growth.
Over time, compound returns could help your KiwiSaver balance grow into a decent little nest egg to help pad out your super and pay the bills.
Investing can make retirement easier
Super and KiwiSaver aren’t your only pathways to a comfortable retirement. If you’d like to have a bit more to live on in your later years, investing could help boost your savings strategy.
Much like KiwiSaver, investing opens you up to the benefits of compound returns. It’s all about keeping your money invested for as long as possible, and making sure you’re investing regularly.
Your risk appetite might affect your investment horizon. For example, you could choose to invest in things that are a bit more risky and volatile in the short term, in order to chase more potential growth in the long term. This could make your small, regular contributions that much more powerful.
What’s the catch?
NZ Super and KiwiSaver might be enough to get by on when you retire, but they have their drawbacks.
Super makes a few assumptions—including that when you turn 65, you own a home without a mortgage. That’s why nana can live in her paid-off house for free, and pay the day-to-day bills out of her super payments.
For a long time, this worked pretty well, but times are changing. People are buying their homes later in life and spending more on them—or in some cases, not buying houses at all. As a result, super alone might not be enough to manage your everyday expenses. For many, $400 a week would barely cover the rent!
Meanwhile, KiwiSaver can only be accessed when you reach 65, purchase your first home, or in a few other less-common cases (like moving overseas permanently or if you’re experiencing serious financial hardship). This means that while you’re able to make voluntary contributions to your KiwiSaver account, you potentially won't be able to access this money until years later.
And, as you know, investing has risks too. That’s why it’s important to think about how your Portfolio is structured and make sure you’re only investing amounts you can afford.
Save now, retire later
While your retirement might still be some years down the track, you can see how the decisions you make today can affect how comfortable (or not) you are when you retire.
That said, there isn’t one single correct way to approach your retirement. It might be a combination of investments, KiwiSaver, and super to live the retired lifestyle you’re after.
If you’re unsure about how much money you’re going to need (or want) in retirement, Sorted’s KiwiSaver calculator can help you figure it out.
Ok, now for the legal bit
Investing involves risk. You aren’t guaranteed to make money, and you might lose the money you start with. We don’t provide personalised advice or recommendations. Any information we provide is general only and current at the time written. You should consider seeking independent legal, financial, taxation or other advice when considering whether an investment is appropriate for your objectives, financial situation or needs.
Register your interest
For the occasional update—and a chance to get early access to our reimagined KiwiSaver experience—register your interest.
To be eligible for early access, you’ll need to have a Sharesies account. If you already have an account, register using the same email address. If you’re new to Sharesies, sign up now.