Choosing the right KiwiSaver contribution rate depends on various factors. Consider your financial goals, budget, and expenses. Don't forget to account for employer and government contributions. Balance your KiwiSaver savings with other financial goals like education, investments, or starting a business to achieve a well-rounded financial plan.
___________________________________________
“Kia Ora team, I’m 19 and am starting a job at minimum wage and 30hrs a week but am stuck at what % KiwiSaver I should choose, I was going to pick %10 for more returns but would like to know what everyone else thinks and would recommend”
(Original question on Reddit)
___________________________________________
Choosing the right KiwiSaver contribution rate is an important decision, and it’s great that you’re considering your options early on. Here are some factors to consider when deciding on your KiwiSaver contribution rate:
Your Financial Goals
Start by defining your financial objectives. Consider both your short-term and long-term goals. Are you primarily focused on saving for retirement, or do you have other financial priorities, such as saving for a first home or paying off student loans? Your chosen contribution rate should align with these goals. If you aim to accumulate more funds for retirement or a first home purchase, contributing a higher percentage can accelerate your progress toward achieving those objectives.
Budget and Expenses
Review your monthly budget and expenses to determine how much you can comfortably contribute to KiwiSaver without straining your finances. Ensure that you have enough money left for your day-to-day expenses. If you are able to set aside more money for KiwiSaver without it impacting your financial situation, then you could consider doing so.
Employer Contributions
Make sure to take into account how much your employer will contribute, as not all employers match your contribution rate. So, if you were thinking of doing 10% in hopes your employer would match that, it’s best to check with them first.
Government Contributions
The government may contribute 50c for every $1 you deposit into your KiwiSaver account (up to $1,042.86). So that’s an extra $521.43 per year for free towards your KiwiSaver. So, when deciding your contribution rate, consider the government contribution as you could choose a lower contribution rate and prioritise maximising your deposit into your KiwiSaver instead if that suits your financial situation. This way, you can find the right balance between depositing and regularly contributing towards your KiwiSaver.
Other goals
If you have other goals you are saving for, such as University, starting a business, investing in stocks, etc… Then, you may consider avoiding choosing the highest percentage for contributing to your KiwiSaver. This is because you might not have enough money to spare for these extra goals, so it’s important to find the right balance which aligns with your personal and financial goals. This way, you can meet both goals without sacrificing one over the other.
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.
