Why KiwiSaver Works?
If you're over the age of 65 and never had KiwiSaver before (or you no longer are in a KiwiSaver scheme), then you might want to consider using KiwiSaver as an investment strategy going forward.
In this situation, don't think about what KiwiSaver was designed for but consider what it can do for you going forward.
Life over 65 now is much different than it was a decade or two ago, with many Kiwis living and working longer and enjoying a more active and youthful retirement.
Why Fund Management is Important
After a lifetime of saving, there's a probable chance that you have acquired a decent some of money.
Cashing in your KiwiSaver fund on your 65th birthday and buying a bach might seem like a good idea but in the absence of other private savings to get you through old age, a pretty risky move.
It's therefore important to may your money work as hard as it can to ensure that there's enough to get you through retirement - you certainly don't want to be in a position of outliving your savings.
Using KiwiSaver to Your Advantage - Part I
1) KiwiSaver after age 65
KiwiSaver used to be closed to anyone over 65 but that ruling was amended in July 2019, when that age restriction was removed.
Whilst there's no free money for those over the age of 65, as a managed fund investment option it is very beneficial.
Even though term deposits are offering attractive interest rates at the moment, many KiwiSaver funds have consistently provided higher returns each year, after fees and tax. Of course, if you're classed as a high earner, KiwiSaver tax rates are more favourable that term deposits.
2) Life expectancy
This is likely to be the biggest unknown during retirement - how long will you live for?
You want your retirement savings to outlive you and not the other way around and assuming you could live well into your 90's, if you retire at 65 that represents a twenty-five year retirement period.
Therefore your investment choices need to represent this - after all, you wouldn't commit to a twenty-five term deposit.
Using KiwiSaver to Your Advantage - Part II
3) Diversification
Most KiwiSaver funds are structured as diversified savings portfolios that invest your money across different sectors, countries and asset classes. They contain a mix of growth and income assets, the proportion of which depends on what type of fund you're invested in.
Diversification is considered to be one of the best forms of protection against sharp losses because you aren't exposed to any single sector.
4) Inheritance Planning
Provided you don't outlive your savings, leaving funds invested can mean you can leave more money to your family. KiwiSaver forms part of your estate which is distributed in accordance with your will.
Using KiwiSaver to Your Advantage - Part III
5) Partial withdrawals
Many people still belive that when you reach age 65, you have to withdraw your whole investment in one lump sum.
However, there are other optionssuch as:-
- Leaving the money invested in KiwiSaver, if you don't need it
- Setting up partial regular withdrawals and allow the rest of your funds to remain invested
- Set up periodic withdrawals to supplement your NZ Super
6) What Is Retirement?
Many people choose not to retire at age 65 - either continuing working fully or slowing down to a more comfortable way of life. If you're not retiring, continuing contributions makes sense so you can continue to build up funds more quickly.
What To Do Next...
The future is bright when you feel confident about your investment choices. If you need help choosing the right investment option for you, talk to us.
Our advice is free and tailored to your individual situation.
Remember, if you're over 65 KiwiSaver gives you access to some useful parking places for your savings. There's the freedom for you to invest in several funds, move your money from one to another, or withdraw the money at any time, so there's plenty of flexibility.