Plan now to fund your retirement
OPINION: I’m a year off 40 (which admittedly is still a while off retirement age) but the older I get, the more aware I’m becoming of what my retirement might look like. If the cost of living is tough now, I can’t imagine what it’ll be like when I don’t have a job to pay the bills any more.
Besides, our retirement is meant to be the best time of our lives. Our kids have left home, we don’t have to work any more, and we can finally treat ourselves to the kind of life we’ve dreamed about for the past 40 years (annual overseas holidays, daily coffees with friends, and living at a bougie retirement village anyone?).
But simple maths tells me that if I’m going to rely on the Government to fund my retirement, there’ll be none of that relaxed living going on.
The current superannuation provision from the Government amounts to $1076.48 (before tax) a fortnight for retirees who live alone, or $817.32 (before tax) a fortnight each for retirees who are married, defacto, or in a civil union.
When you consider what life costs today (the highest rents we’ve ever seen, $3 a litre for petrol, $8 for a cucumber), government superannuation will barely cover your bills unless you’ve got another form of retirement savings.
KiwiSaver makes saving for your retirement really easy.
Essentially a set-and-forget savings scheme, KiwiSaver lets you save a proportion of every pay cheque (ranging between 3% and 10%), then the fund you’ve chosen invests that money on your behalf to grow it.
On top of that, your employer also contributes 3% of your income, plus you receive an annual government tax-back to boost your balance.
You can usually access your KiwiSaver for two reasons: your retirement or to buy your first home. Depending on when you started, how much you contribute, and the level of risk you choose, you could have upwards of a million dollars by the time you retire.
For those of us who aren’t in KiwiSaver yet, it’s never too late to start. Some retirement savings are better than no retirement savings, after all. But signing up to KiwiSaver is just the first step in funding your retirement.
It’s important to be actively involved with your fund’s performance. Studies show that people who have stuck with default KiwiSaver providers could have lost out on hundreds of thousands of dollars. Also, some funds charge sky-high fees. When you take both into consideration, that could be the difference between living a restrictive retirement versus being able to go on regular overseas holidays.
Also, consider your fund’s level of aggression. For people who are going to be retiring sooner rather than later, it might be wise to enrol in a conservative
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fund. For people who still have 20-odd years to go, growth or aggressive funds might be better. There’s more risk associated with these funds but time is on your side so you’re more likely to ride out any lows and see higher returns in the long-term.
The best bit is that KiwiSaver really isn’t that hard. Details of funds’ performance are readily available online, and making the switch to a better-performing fund is usually just an online form that can be completed in a matter of minutes.
To see all KiwiSaver funds, their estimated fees, and recent returns, visit nzcompare.com.
❚ This article was commissioned in response to a commercial partnership. We have produced it independently, to the same standards applied to the rest of our journalism.