GOLDEN RULES
We’ve had a decade of KiwiSaver.
It’s become a central feature of many of our money lives, but not by any means all of them.
That’s shown clearly in a survey done by the country’s largest KiwiSaver provider ANZ.
And yet, many of us remain a bit confused about where KiwiSaver is taking us.
ANZ asked: ‘‘Have you worked out what your KiwiSaver and other savings are likely to amount to by the time you are 65?’’
We answered; Yes (35 per cent), No (63 per cent), Unsure (2 per cent).
Now, I’m not sure how you can be unsure about whether you have worked that out, but the people who answered ‘‘No’’ might benefit from a simple KiwiSaver hack.
First though, I am not entirely surprised by the 63 per cent.
At many points in a human life, building a retirement nest egg is not among your highest priorities.
For example, people with a Take saving seriously
Pay off the mortgage fast Use KiwiSaver well
mortgage wouldn’t save any more into KiwiSaver than the minimum amount they needed to get their employer contributions and the government’s Member Tax Credit subsidy. They direct any spare money into building emergency savings, and paying off the mortgage faster.
Another example is young people saving up for a house.
They care about getting to that magic 20 per cent deposit, not their wealth at 65.
The figures indicate that’s exactly what’s happening.
ANZ found amongst those 18-34 the number who 26 per cent, 35-49 it was 30 per cent and amongst those 50-64, 50 per cent have worked it out.
ANZ did ask people why they hadn’t done any projecting.
The top answers were; ’’Too much uncertainty’’ (35 per cent), ’’I don’t feel like I need to’’ (27 per cent), ’’I don’t care’’ (24 per cent), and ’’It’s too hard/I don’t know how’’ (22 per cent).
I’m sympathetic to ‘‘uncertainty’’. A lot can happen in 20 or 30 years. The last 30 years saw the world lurch to the right, drop taxes, and slash regulation contributing to a massive sustained rise in share prices.
Who is to say what the next 20 or 30 will hold?
Even so, it’s a good idea to know how you are tracking so you can adjust your strategy.
‘‘I don’t care’’ seems silly, but honestly, if you are on really low wages KiwiSaver is unlikely to make any difference to you.
If you are amassing wealth through property investment or business, you may not care either.
But ‘‘I don’t know how’’ is easy to fix.
All you have to do is find an online KiwiSaver calculator.
My two personal faves are ANZ’s retirement calculator and Kiwi Wealth’s Future You calculator.
The calculators make projections built on a few assumptions (anticipated future returns on cash, bonds and shares, and you remaining employed on a rising salary), and magically spit out the size of the nest egg you might have at age 65.
They also project the income that nest egg might get you.
Might is the operative word in both those previous sentences.
Of course the projections will be wrong.
These are not accurate crystal balls, but they do give you an idea of how you are tracking, which can be useful, and becomes more useful as you get nearer to retirement.