KiwiSaver has become the backbone of retirement planning for most New Zealanders but few people know they can keep their investment working long after they’ve stopped.
Recent retirees Bob and Ramona Scott left Auckland 12 years ago looking for a quieter life in the Hawkes Bay. After putting in a lifetime of 50-60 hour working weeks, both enjoyed the more relaxed and realistic pace of their new jobs. A year or two after starting, both joined the Mercer KiwiSaver scheme.
“We only had a few years left until retirement so the only real reason we got into KiwiSaver was for the $1,000 kick-start incentive that used to be offered and the employer contributions,” said Bob.
“We looked at KiwiSaver as providing a lump sum for a nice round-the-world trip. It was a rainy day thought – something that was there in the background.”
According to Glenys Wilson, financial adviser at investment specialist and KiwiSaver provider Mercer, many New Zealanders who have just a few years of saving left before they retire share that outlook.
“If you’ve only had KiwiSaver for 5-10 years, then of course it’s likely the balance will be much lower than someone who has benefited from years of saving, potential investment returns, member tax credits and employer contributions,” she says.
“But it’s not just the amount in your account that matters. Once you’re able to withdraw funds, KiwiSaver can be used as an investment tool that has the potential to earn greater returns than a traditional savings account or term deposit.
“That can make a real difference for retirees who use interest or other returns to top up their superannuation or other income.”
As part of their retirement planning, Bob and Ramona invested cash remaining from the sale of their Auckland property in several term deposits.
While interest rates were initially good, it wasn’t until he retired that Bob compared the performance of money invested in term deposits with money invested in the conservative fund of his Mercer KiwiSaver scheme.
“Once I stopped and took notice of my KiwiSaver returns, I kicked myself because they were outstripping the term deposits we had,” he said.
Because Bob and Ramona had been in KiwiSaver for over five years and were over 65, they could deposit and regularly withdraw money from each of their KiwiSaver accounts.
“Rather than withdrawing the lump sum and closing our KiwiSaver accounts, we’ve found real value in using it to manage our money and investments,” says Bob.
“We still budget but between investing our maturing term deposits in our KiwiSaver and getting a regular monthly withdrawal from it, we’re able to live a comfortable life and do the things we want.”
Want to make sure you’re getting the most out of your KiwiSaver? Find out how Mercer can help by calling the Helpline team on 0508 637 237, 9am to 7pm on all business days.