ARE YOU MAKING THE MOST FROM YOUR KIWISAVER FUND?
KiwiSaver’s a great way to save for your future, but are you really making the most of your investment to ensure you’re on track for a comfortable retirement?
Here are some tips to help you master your KiwiSaver fund:
Pick the right fund for you
A lot of people make the mistake of leaving their KiwiSaver on a default fund with their bank or employer scheme and just forgetting about it. This could cost you thousands over the years as the default funds are automatically conservative. There are several types of fund to choose from (aggressive, growth, balanced, conservative, defensive), and it pays to seek professional advice as to which fund is best for you, depending on your age and stage of life.
One thing’s for certain, though: the earlier you start, the better off you’ll be.
Get free money from the government
If you make the minimum contributions each year (at least $20 a week, or $1043 a year), then you’ll be entitled to the full-member tax credit from the government of $521, which is applied automatically to your KiwiSaver yearly. This credit is available to anyone aged 18-65, and adds up significantly over a lengthy period.
Kind of a no-brainer really.
Increase your contributions
Your level of contribution obviously could have a big impact on your overall investment, and literally mean the difference of hundreds of thousands of dollars come retirement, so pay in as much as you can. Even a small increase of 1% would be significant on compounding investments over a long period of time.
If you have money already in a workplace superannuation scheme or an overseas fund, you could even look at transferring these funds into your KiwiSaver account.
Check your tax rate
Every KiwiSaver member has to pay a PIR (prescribed investor rate) tax rate on their investment, 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 finding out from your provider what rate you’re currently on, and changing it if applicable.
Find out about fees
KiwiSaver providers have different fees for managing your account, so check how much your current provider is charging. There are two types of fees: a flat membership rate (which could cost up to $60 a year) and a percentage rate, based on your account balance (generally the riskier the fund, the higher the fee). When you first start out, and
your account balance is low, the flat fee will have a bigger impact, whereas over time as your balance grows, the percentage fee has a bigger overall effect.
Get professional advice
Your financial adviser can help choose the right fund for you, make sure you’re on the correct tax rate and discuss the fee structure with you. This advice is all free and takes the hassle out of the whole process. You should also get regular updates from your provider, so you can see how your funds are tracking, and whether any changes should be made.
If you’d like to know more, click on the Book Your Session button below and we’ll ask you a few questions so that we can get you going!