Understanding the KiwiSaver Scheme: A Comprehensive Guide to Saving for Retirement

Saving for retirement is essential to support your future self and make the most of your golden years. Unfortunately, many Kiwis struggle to save for retirement. This is why the KiwiSaver scheme was created: to help people like you efficiently save for the future. 

What is KiwiSaver? How can you benefit from it? Finally, how can you make the most of this programme? Let’s review how KiwiSaver helps people like you and what you should do to start saving. 

What Is KiwiSaver?

KiwiSaver is a work-based retirement saving scheme. This voluntary programme is meant to help New Zealanders save for retirement, and it’s available for NZ citizens and residents. It’s not a one-size-fits-all plan, either; there are various fund types, providers and contribution rates available, so you can choose one that best suits your financial situation and goals. 

KiwiSaver works by deducting contributions from the paychecks of employees or from regular deposits by self-employed individuals. There are also government tax credits and contributions, up to a specific limit, to incentivise saving for the future. 

KiwiSaver makes saving for retirement simpler and easier, encouraging everyone to think ahead. Deducting contributions from payroll makes growing your savings easier and hassle-free, without the temptation to take that money and use it now. This makes saving for retirement more ‘out of sight, out of mind,’ so you can have peace of mind knowing you’re putting away money without having to stress about doing it yourself. If you’re self-employed, then setting up a schedule to regularly contribute to your savings can help make the process more streamlined. 

As you can imagine, KiwiSaver has many advantages that make it such an appealing scheme for Kiwis:

  • Government And Employer Contributions. The NZ government can match contributions, adding to your savings. Employers can also contribute, and most employers contribute a minimum of 3% of an employee’s gross pay to their KiwiSaver account. 

  • Ease Of Access. KiwiSaver is hassle-free and accessible, making it an easy choice even for people who don’t know much about structuring successful savings plans. It’s a long-term investment that can grow over time, making it a very suitable component for retirement plans. 

  • Flexible Rates And A Variety Of Plans. You can choose a scheme or adjust contribution rates based on your financial goals. 

Types Of KiwiSaver Funds And Their Risk Profiles

As mentioned, there are various kinds of funds and providers from which you can choose. Three primary types are conservative, balanced and growth funds. Conservative funds are lower risk and better suited for short-term goals, while growth funds have higher risk but offer the possibility for greater returns over time. It’s best to discuss your needs with a qualified financial adviser to determine the right kind of fund for you.

Young investors may prefer growth funds for long-term investments, as they’ll have a long time to grow their savings. Conversely, older individuals who are nearing retirement may want to consider conservative funds for stable, short-term growth before retirement. 

What To Do When Choosing Your KiwiSaver Plan

Choosing a suitable retirement savings plan is vital, so it’s best to think things through carefully so you make the best decision possible. To do this, consider working with an experienced financial adviser to discuss the following:

  • Tailored Advice Based On Your Unique Situation. Everyone’s situations, goals and limitations are unique, so you’ll want to have an in-depth conversation with your financial adviser about your circumstances. Be sure to talk about factors such as personal financial goals and your current situation.

  • Talk About Your Risk Tolerance. Whenever you’re dealing with finances, you should always think about your risk tolerance. Risk tolerance plays a huge role in choosing the right KiwiSaver fund, as some people are comfortable handling market fluctuations and higher risk levels, whereas others prefer stability. 

  • Consider Potential Providers And Review Them When Necessary. Compare different KiwiSaver providers with your financial adviser, as fees vary. You may want to look into each provider’s historical performance, fund options and investment policies. After you’ve chosen your provider, you should review them with your financial adviser at least once every three years. Know that you can only belong to one scheme at a time. 

Saving Up For A Wonderful Retirement In Aotearoa

The best time to start saving for your future is right now, and we at Future Wealth are here to help. We know that financial matters can be stressful and overwhelming, which is why we are dedicated to helping our clients in ways that make sense. We can explain terms that you’re confused about, guide you through your options and work together to find the KiwiSaver plan you need.

Would you like to get in touch with our helpful financial advisers? Call us on 027 628 8010 or use our contact page, and we’ll be ready to assist you.

Future Wealth: Start saving now; your future self will thank you.

Matt Golding