Your KiwiSaver fund is designed to help you save so that you can live comfortably in retirement. Currently, there isn’t an official retirement age in NZ, but at age 65 the NZ Superannuation kicks in and you are eligible to withdraw your KiwiSaver funds, so a lot of people target this as the age to stop working.
Of course, when you retire, you stop earning a wage so it’s important to have a financial plan for your remaining years. You’ll want to maintain your health and quality of life, and be able to do the things you want to do. Whatever is on your bucket list, you don’t want a lack of planning to be the thing that prevents you from living your best life.
So what exactly happens to your KiwiSaver when you turn 65? Here’s how it works.
You can withdraw your money
At age 65, you are eligible to withdraw all of the money in your KiwiSaver account if you choose to - this is called a lump sum withdrawal. You won’t be taxed on the withdrawal, because you have already paid taxes on your returns. You can access every cent you have worked so hard to save, along with government and employer contributions, and your returns!
But, you also have the option to leave all or some of the money in your KiwiSaver fund. By leaving money invested in KiwiSaver, your fund will have the potential to keep growing. Most KiwiSaver providers are able to set up regular withdrawals - weekly, fortnightly, or monthly - so you can use some of your KiwiSaver while the rest stays invested on your behalf. Alternatively, from age 65 withdrawals can be taken out for one-off expenses - a new car, repairs, a holiday - while the rest of your money stays invested.
It is a good time to chat to a financial adviser to see what the best option is for you and make sure that you are in the right fund for your circumstances. You’ll want to assess what your goals are now and, if you keep your KiwiSaver fund active, whether you are in the best fund for you.
You can keep contributing and growing your fund
If you keep your KiwiSaver account open, you can continue to make contributions but you are not required to. You can choose to make regular contributions or lump sum contributions as you like. Why might you want to keep contributing? The average life expectancy in NZ is 80 years for males and 83.5 years for females, so you likely still have some years for your investment to grow.
If you are still working, you can choose whether or not to have contributions taken out of your paycheck. You will have to notify your employer if you want your deductions to stop. Your employer is no longer required to match your contributions but may choose to keep doing so.
One more thing - at age 65, you won’t receive the annual government contribution anymore.
If you’re wondering how much money you will need to retire comfortably, Sorted has a handy retirement calculator that estimates your needs.
What if you die before age 65?
If you happen to pass away while you have an active KiwiSaver account, the funds are transferred to your estate. Your will should include details about your KiwiSaver provider so they can be informed and process the transfer.
KiwiSaver is regarded as relationship property, meaning it is shared with your partner. If you die and leave a surviving partner they can choose to abide by a prenuptial agreement (if you have one) or according to your will.
If you don’t have a will, the rules of intestacy apply and your spouse or partner takes first priority in inheriting your estate, followed by children, parents and siblings.
KiwiSaver is for everyone
If you are over 65 and you don’t have a KiwiSaver fund, it isn’t too late to sign up! As of July 2019, there is no age limit to entering KiwiSaver. As a managed investment, it may be a good option for looking after your retirement nest egg. If you have money in a term deposit or savings account, you may benefit from earning higher returns by putting the money into a KiwiSaver fund. The ability to contribute or withdraw as you like makes it a flexible option.
The team at BetterSaver are here to help you make decisions regarding your KiwiSaver, no matter what your age or circumstances are. Try our Fund Finder quiz or send us a message to make sure you’re making the best choices when it comes to KiwiSaver.