Get Retirement-ready with KiwiSaver
Mon Dec. 2nd 2019
Fund your old age in comfort
Most of us can expect to live a long life these days. You can help make your old age a healthy one through good lifestyle habits, but to be really comfortable after you retire, you need to have saved some money, on top of your NZ super.
What that means for people under 65 is: start saving, right now. A regular little bit put away today can add up to a lot over a few decades.
That's why KiwiSaver is so great. A small portion of your wages or salary gets whipped away before you even know you have it, and starts working for you immediately as an investment. Even better, your employer is adding a little bit too, up to 3% of your take-home pay. The government is also contributing a member tax credit of up to $521 a year.
Making your KiwiSaver work for you
So if you're starting to think about retirement, what can you do now to maximise your returns from KiwiSaver? To get the very best out of your investment, you need to consider your age and circumstances, your money personality, and what investment balance will work for you. That way you can to choose a provider and a fund that offers the best range of investments, at fees you can afford.
Choose a provider
When you open your KiwiSaver, you'll be put into what amounts to a default fund – this won't necessarily suit your plans or your ethics, and may not be earning you the best return. Shop around, look into service promises and investment approaches and choose a company that suits you. If in doubt talk to a financial advisor about the options.
How much risk should you take?
KiwiSaver fund profiles are labelled according to the level of risk: defensive (low risk), conservative (low-to-medium risk), balanced (medium risk), growth (medium-to-high risk), and aggressive (high risk). So, which one should you choose?
A growth or aggressive fund – that is, an investment that may pay out the highest returns – is right up there when it comes to risk. When the funds are doing well, you're earning top dollar. The down side is that growth funds are less stable, and more likely to go up and down in value. You could actually lose money from your funds at times. Property and shares tend to land in this category.
Generally, a high-risk fund is more suitable for younger investors, because over time the ups and downs will balance out. Older investors, who may want to retire in ten years or less, are often advised to choose a more balanced fund, with some money in conservative investments and some in growth, because there is less time before they retire to recover from losses.
Making this choice might need some expert knowledge from a financial advisor. You'll have an eye kept on your account, so that if your lifestyle changes (you earn more, or less for example) you get help adjusting your investments to fit the new circumstances.
When you become a member of KiwiSaver, your money goes into a pool along with other's funds. That pool is invested across a range of enterprises, in order to spread the risk. If you care about where your money goes, and you don't want to be financing tobacco companies or munitions factories, you'll need to do some research.
Check your provider's online annual disclosure statement (the fine print!), and let them know your ethical preferences. You can also check out this list of KiwiSaver funds that have some filters in place to weed out less ethical companies. Again, working with a financial advisor can often mean they'll do this legwork on your behalf.
Then there are fees
Your KiwiSaver provider charges fees for the job it does – managing your money and the administration costs that go along with that. Higher fees might mean more active management, and therefore a better return for you. Your financial advisor can help you decide if your provider is giving you your money's worth, or not.
It's never too late to make the most of KiwiSaver
KiwiSaver is a simple and effective addition to your retirement investments and savings to ensure you can live the way you want. Even if you're looking to retire in just a few years, starting now to actively manage your KiwiSaver can mean the difference of thousands of dollars.
Once you've chosen your KiwiSaver provider and are set up to save, you've taken your first best step to preparing for a comfortable and prosperous retirement. The next best step is to keep an eye on your investment, and make adjustments to suit as your lifestyle changes.
Ready for the future? Talk to Cave Financial about your retirement saving plan.
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