KiwiSaver 101: Level up your investment journey

With talk of economic storm clouds and recession on the 2023 agenda, many New Zealanders may be thinking about how to improve their finances and plan for the future. Being proactive with your KiwiSaver approach is an easy and effective first step to leveling up your investment journey.

Ken Knight of Generate Wealth, more aptly known as ‘KiwiSaver Ken,’ told our Lodge Home Truths podcast that while most New Zealanders are part of the KiwiSaver scheme, many remain in the dark about what fund they are in, the ins and outs of different providers, and how to most effectively use the scheme to purchase their first home.

Ken joined hosts (and Lodge Real Estate sales consultants) Donna Southwick and Sue Hall to discuss the basics of how KiwiSaver works, how you can get the full benefits of KiwiSaver through each life stage and why getting personalised advice should be your first step.

What is KiwiSaver?

KiwiSaver emerged out of the 2007 global financial crisis designed as a work-based retirement scheme, with the added ability to withdraw funds to buy your first home – replacing one investment with another.  

The KiwiSaver scheme is more than just a savings account, it is a managed fund that allows your savings to garner a greater return over time, says Ken.

“How you view your KiwiSaver really depends on the ‘game’; are you saving for retirement, or are you saving for a house? And how long will that take you?”

If you are 18 and over and looking to save for your first home, you may opt for a more high-risk fund as you would not need access to that money in the near future. Whereas if homeownership is on the horizon, Ken recommends you protect your nest egg in a lower risk fund due to market fluctuations.

Getting your ducks in a row

Ken says that understanding your scheme and aligning it with your financial goals is vital, and ensuring you have all your ducks in a row can have a significant effect, especially for first-home buyers looking to save for a house deposit.

“Your KiwiSaver contributions are managed by investment professionals who make the tough decisions, so you don’t have to.”

Though not all KiwiSaver schemes are created equal, notes Ken.

“The scheme is not a one-size-fits-all set and forget. It is important to be deliberate and thoughtful with your provider, fund type and contribution rate. Most importantly, seeking professional and personalised help is the first step to achieving your financial goals.

“Whether you’re a hopeful first-time buyer or retirement is on the horizon, these are both significant milestones that the KiwiSaver scheme can help achieve.”

Already purchased a home?

For existing homeowners that are unsure if KiwiSaver will be worth their while for retirement, it is important to consider the employer and Government contributions that sweeten the deal.

Your employer contributes a minimum of 3% of your pay before tax towards your KiwiSaver, while the Government contributes a maximum of $521.43 to your account each July.

“The Government is going to match 50 cents to every dollar you contribute [up to $1,042.86], so at the end of the day you put $1,000 in, you get $500 back – that is a 50% return,” notes Ken.

“Taking advantage of these additional contributions can get you closer to your financial goals sooner.”

The key to success? A balanced diet

For those questioning the safety of the scheme, Ken says that any investment carries risk. “But if we don’t take the risk, we don’t get the reward.”

“The reality with KiwiSaver is that you’ve got dollar cost averaging and diversification. We are not just putting all your money in one company at one time – it’s not a keto diet, its protein, carbs, good fats; it’s a balanced diet.”

Choosing the right KiwiSaver provider means you can leave the investment decisions to the experts.

“We are doing it so you don’t have to, you’ve got other things to worry about. So as far as investment in the sharemarket goes, it’s hard to go wrong.”

No part of this blog or the Home Truths podcast episode is intended as personal financial advice, it is intended as general information only. Issuer is Generate Investment Management Limited and the Product Disclosure Statements are available at generatewealth.co.nz/pds. Past performance is not indicative of future performance.