If your retirement is getting closer, there are a few things you should do to ensure that your KiwiSaver fund is ready. No one wants to stress about money - it’s time to kick back and enjoy your new lifestyle. You’ve earned it!
You have a few options available as to how you use your KiwiSaver in retirement. But first, it is critical to make sure that your investments are in a place where they can provide a steady stream of income for the rest of your life. Is it time to change your fund type? How will you budget when you’re no longer earning? And how do you withdraw your KiwiSaver, anyway?
Here’s what to consider for your KiwiSaver fund when retirement is on the horizon.
Your fund type
If you have been investing in a growth fund, you will have seen your KiwiSaver balance make some ups and downs over the years. With time on your side, you can take risks and ride out the market. But when facing less than 10 years until retirement, you may want to want to secure your fund. This is not the time to take big risks. That might mean moving out of growth funds and into funds that carry less risk. The idea is to protect your assets from any sudden dips in the market.
Most experts suggest that you should look to move out of a growth fund when you have less than 10 years until retirement. Your options are to move to either a balanced fund or a conservative fund. A balanced fund invests some of your funds in stable investments (cash and bonds) and some in assets that carry a higher risk (shares and property). It is a good in-between option if you still have a few years to go. However, if retirement is looming within a year or two, a conservative fund is the safest place to park your KiwiSaver. Your balance will remain relatively stable - it won’t grow by a lot, but you also won’t be surprised by any major decreases.
A financial adviser can help you determine which risk type is right for you. You can’t afford to take a chance and hope you get it right. Take BetterSaver’s Fund Finder quiz at any time to find out if there is a better fund for you.
The budget you have now isn’t going to work when you no longer have employment income. A detailed budget can be your best friend when it comes to ensuring your retirement fund lasts.
Start with the basics - rent or mortgage, maintenance on your home or car, and insurance. Then consider that you need to plan for an increased cost of healthcare. Finally, there will be other things you will want to do with your newfound free time, like travel.
We have a handy KiwiSaver calculator that estimates how long your KiwiSaver could last. Remember, you will also be able to claim Superannuation. As of April 2022, a single person receives $1076.48 before tax every fortnight. For a couple, you can receive $817.32 each. The Super is not affected by any other income you receive. You can also get a SuperGold card that provides discounts on certain services like groceries and fuel to those 65 and over.
It’s scary, but many Kiwis who are now in their 30s stand to run out of KiwiSaver cash less than four years after retiring. Don’t let that be you - check your fund type and set a budget now, no matter your age.
When to withdraw your KiwiSaver
At age 65, you are eligible to withdraw all of the money in your KiwiSaver account. But should you?
There are several ways you can choose to use your KiwiSaver in retirement, depending on your circumstances.
Leave your money in your KiwiSaver and let it continue to grow.
Set up a regular withdrawal to supplement your Super or other income sources.
Withdraw a lump sum of your savings at any time.
There is no set retirement age in NZ. These days many people continue working after age 65. If that’s you, you may want to leave your KiwiSaver to grow a little bit longer and even keep making contributions. Your employer is no longer required to contribute to your fund, but they may choose to do so. You also will no longer receive the government contribution.
You can choose to keep your KiwiSaver going and set up regular withdrawals weekly, fortnightly, or monthly. Doing this means you keep earning returns while budgeting yourself a regular income.
Making a lump sum withdrawal can be appropriate if you want to use your money to pay off a mortgage or if you choose to invest it elsewhere. Just resist the temptation to blow it all and leave yourself short. This is where budgeting is key.
However you choose to withdraw your KiwiSaver fund, you need to talk to your provider to set it up. They will confirm your eligibility and work with you to give you access to your funds.
The best thing to do is seek financial advice from a professional adviser. They can take a look at your situation and advise you on the best option for you to ensure your savings last as long as you need them to. And if you choose to keep your fund active, they can make sure you are in the right type of fund.
Preserving your KiwiSaver for life
It is never too late to start planning for retirement. The earlier you start, the better off you’ll be - and the easier it will be to retire in the lifestyle you want.
If you want your KiwiSaver to see you through retirement, the best thing you can do is make sure you are in the right fund for you right now. Even if retirement is decades away, you want to make sure you make the most of your KiwiSaver while you have time on your side. If the finish line to retirement is in sight, you want to secure your funds so they last for the rest of your life.
BetterSaver makes it easier than anyone else to match you with the right fund, no matter your age or circumstances. Take the quiz and find a better fund in just five minutes. It’s that easy.