KiwiSaver has grown significantly since its inception, with over 3 million members and total assets exceeding $108 billion as of March 2024. Despite this growth, there remains a substantial number of members in default funds, which may not be optimal if you are relying on your KiwiSaver investment to fund your retirement goals. Actively managing your KiwiSaver, from selecting the right fund to adjusting contributions, can make a significant difference in your retirement readiness.
Here’s why it’s crucial to actively manage your KiwiSaver and some key strategies to enhance your savings.
Reviewing your KiwiSaver contributions every few years is essential to ensure you’re on track to meet your retirement goals. The default contribution rate is 3% but increasing it to 4% or more can have a substantial impact on your final retirement fund.
For instance, if you’re earning $60,000 annually, contributing 3% versus 4% can mean a difference of tens of thousands of dollars by retirement due to the effect of compound interest. The Financial Markets Authority (FMA) reports that even a 1% increase in contributions can significantly enhance your savings over time.
A good time to review and adjust your contributions is whenever you receive a pay rise. This proactive approach helps your savings grow in line with your income.
Understanding what type of investor you are is crucial in selecting the right KiwiSaver fund. KiwiSaver offers various funds ranging from conservative to aggressive, each with different risk levels and potential returns.
Conservative funds are generally lower risk but offer smaller returns, suitable for those close to retirement or with low risk tolerance. In contrast, Aggressive funds are higher risk but can provide higher returns, ideal for younger investors with a longer time horizon.
To help identify your investor profile, speak to a financial adviser who will be able to give advice tailored to your specific circumstances. By understanding your risk tolerance and investment objectives, you can choose a fund that aligns with your retirement goals and maximises your returns.
Given the complexities of investment strategies and market conditions, getting professional financial advice is highly recommended. Financial advisers can provide tailored advice based on your personal circumstances, helping you choose the right fund and contribution rate.
Data from the FMA’s 2023 KiwiSaver Annual Report indicates that members who regularly seek financial advice tend to have higher balances and are better positioned to achieve their retirement goals. An adviser can also help you navigate changes in your financial situation, ensuring your KiwiSaver strategy remains aligned with your goals.
Checking your KiwiSaver balance every year or two is a good practice to stay informed about your investment performance and understand the growth trajectory of your savings. Regular monitoring can keep you motivated as you witness the power of compound interest and long-term investment growth – but also remember that KiwiSaver tends to be a longer-term investment. If you aren’t planning on drawing on your fund in the near future for a house deposit or retirement, your appetite towards risk may be slighter higher as you have time to ride out market fluctuations.
The Commission for Financial Capability’s data shows that members who regularly monitor their balances are more likely to make informed decisions about their contributions and fund choices. This habit not only keeps you engaged but also helps you identify any necessary adjustments to optimise your returns.
Taking an active role in managing your KiwiSaver is crucial for securing a comfortable retirement. By regularly reviewing your contributions, understanding your investor profile, seeking professional advice, and monitoring your balance, you can ensure your KiwiSaver works hard for you.
If you are interested in understanding more about your investor profile and whether your KiwiSaver fund is optimised for your personal circumstances, our team is here to help. To book a complimentary review of your KiwiSaver investment strategy click here or email cl************@th*******.nz with the subject ‘KiwiSaver Review’.
The content of this article should not be taken as financial advice, or a recommendation of any financial product. Threefold is not liable or responsible for any information, omissions, or errors present. We recommend seeking advice from a qualified financial adviser before taking any action.
