Never too late to be on track
INVESTORS are being urged to consider retaining some growth assets in their KiwiSaver investments as they get nearer retirement, to ensure they give their money the best chance of lasting as long as they do.
Many investors slowly move from high-risk, high-return growth assets to more stable but less high-performing conservative assets as they get closer to 65.
But David Boyle, group manager of investor education at the Commission for Financial Capability, said they did not always consider that they could live for at least 20 years in retirement – and would need savings to last that long.
‘‘If you don’t need it straight away, you might be able to afford to have it working a bit harder, for a bit longer,’’ he said.
ANZ Bank’s general manager of wealth products, Ana-Marie Lockyer, agreed. ‘‘Just because you turn 65, it doesn’t mean you are going to need to spend your savings immediately. You’re building a balance to last the rest of your retirement.’’
She said a lot of earnings could still come from the portfolio after the saver reached retirement age, especially while the balance was as large as it was going to get.
If the KiwiSaver member knew it was likely to be a long-term investment and could stomach potential volatility, they could give themselves more cash for retirement by leaving it in a higher-returning fund for longer.
Lockyer said splitting the investment between different funds was another option, to retain exposure to riskier assets.
Boyle said once people hit 50, they should increase their contributions. ‘‘This is the best time to take a breath and see how much you could genuinely save now that you couldn’t before, and what difference that might make to your final balance.’’
Making a sacrifice to put more money into KiwiSaver was less painful for those aged over 50, because it was not such a long wait to be able to access the money, he said. ‘‘Fifteen years will come around pretty quickly.’’
Boyle said people should not underestimate the difference they could make to their final balance if they stepped up contributions in the latter part of their careers.
‘‘In a lot of cases, if you started at 42 and now you are 50, and you have been gainfully employed and making contributions all that time, a lot of people are surprised at how quickly their balance has grown,’’ he said. ‘‘But that’s after eight years; what could it be like after another 15?’’
Lockyer said people should seek advice at 50 or 55 and again at 65. ‘‘It is never too late to make sure you are on track for the retirement you want.’’
She said it was important for people to consider their entire financial circumstances, not just KiwiSaver. ‘‘Don’t look at KiwiSaver in isolation as you get closer to that age.’’
Next week: Getting on top of debt