Now is the time to check your KiwiSaver statement. It will arrive in the letter box, email, or via your provider’s KiwiSaver app. Don’t put it in a drawer! It’s not a bill, it’s a tool to help you plan. The statement has been designed as a decision-making tool, giving you the key information you need to plan your retirement savings. I want well-informed investors, but I also know that families, and singles too, are struggling with the cost of living. Right now, KiwiSaver and retirement can seem a distant thought. Life, like investment returns, has its ups and downs.
For most people, 2024 isn’t the year to increase contributions, and that’s okay, my own contributions haven’t been as high as they once were. That’s why this year’s campaign focuses on the things you can do in an annual health check for your KiwiSaver. It’s about what you can do now to deliver more money in retirement.
Knowing when you’ll retire
Knowing when you plan to retire helps you make good decisions along the way. You can access your KiwiSaver at 65, the same age when most people start to receive NZ Super. This doesn’t necessarily mean you have to retire at 65. Some people need to continue working, maybe to build more savings, maybe they love their jobs. Having a target retirement date helps you plan so you know how much money you need to retire and how long you have to save it. The annual statement gives you an estimate of what you’ll receive at 65 and what that might pay you each week. Helpful when thinking about when you can afford to retire.
As you start to consider a target retirement date, probably something to do in your 50s, it’s also time to re-visit what growth fund you’re probably invested in. Growth funds are fantastic when you’re a long way from retirement, but as you get closer it’s a good idea to start de-risking some of the savings. If there’s a stock market crash or a recession, your investments hopefully won’t fall as much in the conservate fund, but don’t put all your money there as you’ll miss the long-term returns.
Being in the right place, or the right fund, matters
Economists always talk about risk and return, if you take higher risks you should expect to see higher returns, over the long term. On the other hand, if you are going to use your KiwiSaver in the short term, it’s wise to take some risk off the table.
For most people KiwiSaver isn’t like a normal investment, you can’t take the money out until you’re 65. The key benefit of this approach is that it prompts longer-term decisions about your investments, and you know exactly what this money is for, whether it’s coming out of your salary or your self-employed earnings. The long-term view means you can accept more risk and expect a higher return.
Being in a growth fund rather than a conservative fund is a good way to achieve this when you are younger with longer until you retire. But if you are coming up to 10 years before retirement, then it’s time to think about removing some of the risk and volatility and considering more conservative funds. You can also take the information from your individual statement and use some of the tools on the Sorted website, like the retirement savings calculator, and the fund finder. Find out what difference it would make to your final balance if you chose a growth fund when you’re young rather than a conservative fund.
Consider the fees
Fees expressed in dollar amounts in the annual statements are helpful as people can see exactly how much they are paying. Annual statements also explain what you are paying for – how the provider is delivering investment returns.
Wherever you’ve invested try to understand the fees and what you are paying for. If it’s a high fee but you’re seeing great total returns (headline returns, minus fees) that’s okay. If the fee is low, that’s great but you still need to make sure the investments are generating a return and you are being treated fairly.
For many people 2024 isn’t the year to worry about increased contributions, but it’s a great time to check in on the plan. Normally I wouldn’t say this, but 2024 has been a hard year, KiwiSaver isn’t top of people’s mind and so a rule of thumb might help. If you’re under 50, unless you are saving towards your first home deposit, consider more growth-oriented funds with reasonable fees, and a provider you believe is looking after you. Then check back in a year. If you’re over 50, you need a plan and reading the annual statement is the first step. Good decisions today will make for a better retirement.
Related resources
- KiwiSaver 2024: Check in with your nest egg
- Time for your annual KiwiSaver health check
- Sorted Website
- KiwiSaver projections
