If you're facing financial hardship and thinking about withdrawing from your KiwiSaver, this article sheds light on the potential consequences. Learn how it can affect your retirement savings, credit score, missed government and employer contributions, and more.
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“How hard is it to pull a couple grand from kiwisaver for financial hardship? Currently unemployed and struggling to get a job. Does it affect your credit score?“
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If you are experiencing significant financial hardship, you may be eligible to withdraw some or all of your KiwiSaver. However, it is important to note that withdrawing funds for financial hardship can have long-term consequences on your retirement savings. Here are some implications to consider:
Impact on Credit Score:
Withdrawing money from your KiwiSaver due to financial hardship does not directly affect your credit score. KiwiSaver is a voluntary retirement savings scheme, and withdrawals for financial hardship are not reported to credit bureaus.
Missed Government and Employee Contributions:
When you withdraw funds for financial hardship, you typically miss out on government contributions (if eligible) and any potential employer contributions. The government’s annual contribution, known as the member tax credit, is up to $521.43 per year if you contribute at least $1,042.86 annually. Additionally, many employers match employee contributions, which can significantly boost your retirement savings.
Lower Savings for Retirement:
One of the primary purposes of KiwiSaver is to provide for your retirement. Withdrawing funds for financial hardship means you will have less money saved for your retirement, which can have long-term consequences. Compounding interest over time can substantially increase your retirement savings, and by withdrawing early, you miss out on these potential gains.
In conclusion, pulling money from KiwiSaver for financial hardship is possible, but it should be approached with caution due to its potential long-term impact on your retirement savings. You may miss out on valuable contributions, lose the benefits of compounding interest, and it won’t affect your credit score. Before making this decision, consider alternative financial assistance options and seek advice from a financial advisor if necessary.
Hope this helps.
Regards, Clive Fernandes (Financial Adviser)
Director – National Capital
Disclosure: I am the director of National Capital, a KiwiSaver advice firm. The views expressed in this article are the views of the author. The information provided is of a general nature and is not intended to be personalised financial advice. You may seek appropriate financial advice from a Financial Adviser to suit your individual circumstances or contact National Capital.
