KiwiSaver, established in 2007 is a “voluntary, work-based savings initiative to help you with your long-term saving for retirement”. 2.9 million people out of the population of 4.77 million are now enrolled members in KiwiSaver, and have begun saving for retirement.
We all need to begin thinking seriously about KiwiSaver because we are all starting to live longer. For example, did you know life expectancy at birth has increased 12 years since 1950? This means life expectancy in excess of 85 is becoming more of a reality. So, if you are wanting to maintain or improve your lifestyle when you reach retirement, you’ll need to start taking action now.
So how can you maximise your KiwiSaver account, and prepare for retirement?
1. Review your contribution rate
Contributions to KiwiSaver from your salary make up the backbone of your retirement savings. You can contribute, 3%, 4% or 8% of your salary. And once new legislation passes, which is expected to be in April of this year, you’ll be able to contribute 6% or 10% of your salary. You can also make additional voluntary contributions. Your choice may not feel significant right now, but the impact once you reach retirement can be substantial. Because of the power of compounding returns, contributing just 1% more can make a difference of $50,000 or more come retirement*.
2. Maximise your incentives
The government wants people to start saving. Member Tax Credits, which are soon to be renamed ‘Government Contributions’ once expected legislation passes, are available to all KiwiSaver members who reside in New Zealand throughout the year, and contribute to their fund. Employee and Voluntary contributions receive a Member Tax Credit of $0.50 on every $1.00 up to a maximum contribution of $1,042.86. Your contributions above this amount do not receive the government contributions.
Secondly, your employer is obliged to match your employee contributions, up to at least 3% of your salary.
Contributing enough to make sure you’re receiving the full employer and government contributions will put you a long way down your retirement savings path.
3. Choose an appropriate fund
Your risk profile, and investment time horizon are important factors when selecting which KiwiSaver fund(s) to invest in. Providers offer a range of investment funds to clients. Milford’s KiwiSaver Plan offers three different investment funds for KiwiSaver members. These are the Conservative Fund, the Balanced Fund, and the Active Growth Fund. To see which fund may suit you best, try our risk profile tool here.
Milford aims to be a world class investment partner of choice, delivering the best investment outcomes and client service. All Milford employees invest their own retirement savings exclusively in the Milford KiwiSaver Funds, right alongside our clients. To learn more about how we can help you make the most of your KiwiSaver account visit here.