With the increased number of Kiwis now involved in KiwiSaver, more of us understand the importance of saving for retirement. Now, to master it!
It’s great that Kiwis are becoming more and more engaged in planning for their future. With life expectancy rising in New Zealand, making a few key decisions now can really make all the difference when it comes to ensuring a comfortable retirement.
As financial planners one of our key goals is to help our clients turn their retirement dreams into reality (in a practical sense!). We hope this article will help in some way for you to achieve your own goals for retirement, whatever they may be.
Here are our 5 Must-Do’s for making the most of your KiwiSaver:
- Start early! It’s never too early to start KiwiSaver and make your first contributions. In fact, the earlier you start the better it is, as the money put towards your KiwiSaver will accumulate and start building for your retirement. From the age of 18 the government contribution (up to $521.43/year) is available to contributing KiwiSaver members. This graph shows how much starting early matters:Based on a $50,000 p.a salary with a 3% contribution, inflation adjusted and retirement at 65 years of age. Data source: sorted.org.nz.
- Contribute as much as you can. The level of contributions you make can have a significant impact on your retirement funds. Based on the scenario above, by increasing contributions by just 1% (from 3% to 4%) a 20 year old could increase their retirement fund to $365,537. That’s an extra $52,129 available in retirement. It’s easy to change your contribution rate – the most convenient way would be to fill out a KiwiSaver deduction form (KS2) and give it to your employer for action.
- Get the full Member Tax Credit. Every year. The government pays 50c in every dollar you contribute to KiwiSaver up to the $521.43 each year, so why wouldn’t you? This is available to anyone aged between 18-65 who makes contributions during the year (from July 1st to June 30th), and is applied automatically. The cumulative effect of these tax credits add up significantly over the life of a KiwiSaver member.
- Don’t pay too much tax! Every KiwiSaver member has to pay a PIR (Prescribed Investor Rate) tax rate on their fund, which is based on your annual income. It defaults to the highest rate of 28% if you haven’t specified otherwise, so it’s worth checking. This is something that your Cole Murray Adviser will help you with and check each year for you, provided you’re one of our KiwiSaver clients.
- Get in the right fund, with the right advice. Your financial adviser can help you get everything sorted by advising the most appropriate fund choice, discussing contribution rates and making sure you are paying the correct tax rate. As we are remunerated by the provider, our KiwiSaver advice is free of charge to you – so there’s no reason not to have a qualified professional on your side!
Like to know more? Get in touch with us today and we’ll work together to optimise your retirement nest egg. We can also help you determine how much you are likely to need in retirement, and build a plan to get there.