KiwiSaver is a versatile savings program that aligns with various financial goals, whether you're saving for retirement or buying your first home. With automatic contributions, government incentives, and employer contributions, it's a convenient and effective tool for growing your savings over time. Consider KiwiSaver as a valuable choice for achieving your financial objectives.
___________________________________________
“I am starting a new job and I have the option now to opt in to KiwiSaver. I have never used KiwiSaver before (I wasn’t a resident then).I am planning on studying next year and because of the current house market, my partner and I probably won’t buy a house in the next 5+ years. Is it worth signing up for it, or should I just keep the money myself?”
(Original question on Reddit)
___________________________________________
KiwiSaver is a voluntary savings program designed to make it easy and affordable for people to save for their retirement or first home. Whether you should sign up depends on your financial goals. Are you already saving for retirement through another method, or are you considering saving for retirement now? Perhaps you’ve opted to delay retirement savings and want to focus on buying your first home within the next five years.
Understanding what KiwiSaver offers and how it aligns with your financial objectives will empower you to decide whether it’s the right choice for you. For most Kiwis, KiwiSaver is the right choice as it aligns with their retirement goals or helps them save up for their first home. Here are some factors you should consider when making the decision to opt into KiwiSaver.
Retirement Savings
If your retirement plans include staying in New Zealand, contributing to KiwiSaver can effectively grow your retirement savings. Contributions are deducted from your salary before you receive it, making it a convenient way to save. You won’t even need to make an effort to set aside money as it will automatically be deducted from your salary and set aside into your KiwiSaver account.
First Home Withdrawal
KiwiSaver offers a First Home Withdrawal option, which allows you to use your KiwiSaver savings to help purchase your first home. If you’re planning to buy a house, KiwiSaver can be a valuable tool to save for a down payment. There are other benefits of using KiwiSaver to save for your first home, such as the first Home Grant. You could be eligible to receive a grant of up to $5,000 to buy an existing home or up to $10,000 if you are building or purchasing a newly built home.
Government contribution
The government may contribute 50c for every $1 you deposit into your KiwiSaver account each year (up to $1,042.86). So that’s an extra $521.43 per year for free towards your KiwiSaver. Over time, this contribution has the potential to compound significantly, making it a valuable tool to help you achieve your retirement or first home goals.
Employer Contributions
Many employers in New Zealand are required to contribute to your KiwiSaver account if you’re a member. This can be seen as “free money” to boost your savings over time. If you opt-in and contribute 3%, 5% or even 10% of your income, your employee may be able to match that, though many employers match only to 3%.
Since you’ve mentioned that purchasing a home within the next five years isn’t in your immediate plans, considering KiwiSaver as a means to save until you’re ready to make your first home purchase can be a good strategy. KiwiSaver tends to yield better returns compared to simply leaving your money sitting in your bank account. Therefore, using KiwiSaver to save up for your future home can be a good reason to become a KiwiSaver member.
In most situations, KiwiSaver is a valuable choice because it facilitates saving for both your retirement and your first home. Without KiwiSaver, many New Zealanders find it challenging to allocate funds for these important goals, making it a wise option to seize the opportunity it offers.
Hope this helps.
Regards, Clive Fernandes (Financial Adviser)
Director – National Capital
Disclosure: I am the director of National Capital, a KiwiSaver advice firm. The information in this post is only general in nature and is not personalised financial advice. Please contact us if you want financial advice.
