Booster's New KiwiSaver App
Booster have made checking your account so much easier! Booster NZ App is now ready for clients Booster What you can do......
What is KiwiSaver?
To explain KiwiSaver simply, you contribute from your pay each week and in addition your employer and government contribute on your behalf. The amount and frequency depend on your employment. Your contributions then get invested on your behalf by a KiwiSaver provider.
Why should I be in KiwiSaver?
The whole philosophy of KiwiSaver is based around contributing a small percentage of your income on an ongoing basis. This discipline of investing a little each and every week means that over time you will grow a fund that will pay you back in retirement. The long-term approach gives the advantage of dollar cost averaging, constantly buying ‘units’ at varied prices averaging out their cost.
How do contributions work?
If you're employed by a company and you elect to join, you will contribute either 3%, 4% or 8% of your salary before tax, to your KiwiSaver fund. If you are self employed, you will contribute as your employer an amount that is appropriate for you. In both circumstances the government will match 50c for every dollar that you contribute up to a maximum of $521 per year, this is called a member tax credit. In addition to your contributions your investment will also make returns / growth which will add up to be a large part of your fund in the long run.
KiwiSaver is a dream for first home owners.
Accumulation for a deposit for a first home is one of the great features of the KiwiSaver scheme. The government here in NZ have given first home owners the opportunity to withdraw from their KiwiSaver fund for use on a first home purchase (eligibility requirement apply). This withdrawal will form part of a first home buyers deposit, if not all. There are also a couple of incentives that the government has for first home buyers creating the perfect storm to get in to your home.
KiwiSaver for Retirement
If you haven't put much thought in to retirement now is the perfect time to start, it's never too late. Your KiwiSaver can provide a stable income for the 30 years you're likely to be living during retirement.
Have you thought about your asset allocation and your time frame in regards to investing? These are the two biggest factors (risk and reward). A large portion of your retirement fund will be made from growth. Compounding interest is very powerful over a long time frame. The growth you get in the early years determine how much growth you will make in the later years. 1 or 2% can go a very long way over a 30 year time frame.
Breaking Down Asset Allocation
Now what's the difference between Default, Conservative, Balanced, Growth fund types? It all comes down to asset allocation
Conservative funds have lower volatility and also less growth whilst, Growth funds have more growth and more volatility.
The table below shows a simple illustration of the selection of funds types and their differences in risk and return.
Growth and volatility are important but the most important factor is time.
Time determines how much we can risk we can withstand. As a general rule, the longer the time frame the closer you want to be in a growth fund and the lesser the time frame the closer you want to be to a conservative fund. But remember it is your choice and you don have options on when you want to liquidate the fund. Just because you have access your bag of money at 65 doesn't mean you have to take it out of KiwiSaver.
Don't stress about these decision too much, just ask someone who can explain the difference.
"I doubt KiwiSaver will every make you rich but it will ensure you are never poor", provided you get the right advice. The wrong advice could cost thousands in earnings, so we would like to stress how important it is to talk to a financial adviser.
Robert Baldwin | FoxPlan