With a couple of tiny tweaks, your KiwiSaver could make you more money. And who, in these brutal economic times, wouldn't take advantage of that? By Frances Cook
You’ve got a gift card in your wallet. It’s worth $260.72. It expires June 30. And there’s a reasonable chance you’re going to let it lapse while you’re busy doing literally anything else.
That gift card is your KiwiSaver government contribution, but every year, thousands of New Zealanders miss out on it. And it’s not just the $260.72 you’re missing out on.
There are small setting changes that can mean you get hundreds of thousands of dollars more, there are tax changes for the self-employed, and ways to use KiwiSaver to basically give yourself a pay rise. But we miss these things, because it’s common to dismiss an easy win as not worth having. But those small cash deposits can build up in the background, until they’re worth substantial money.
So here’s how to get the easy KiwiSaver wins locked in, before it’s too late.
The expiring gift card
If you put $1042.86 (about $20 a week) into your KiwiSaver between July 1 and June 30, the government tops you up with $260.72.
That might seem like a small amount over a year, but imagine if someone offered to pick up your grocery bill for a week, or handed you $260.72 to splurge at your favourite store. Wouldn't you be stoked? I would.
The trick is that once the June deadline passes, you can’t go back and get that money. The opportunity is gone.
So make sure you put that money into your KiwiSaver before the deadline, even if it’s not the full $1042. You’ll still get back 25c for every $1 up to that number.
The pay rise you’re turning down
While you’re in there, check something else.
If you’re employed, your employer legally has to match your KiwiSaver contributions at a minimum of 3.5%.
If you’re contributing less than 3.5% of your salary or wages, or you’re on a contributions holiday, you’re not getting that match.
Which means you’re basically turning down a pay rise.
In the current economic environment , where plenty of people are getting annual pay rises of 1%, 2% or nothing at all, voluntarily opting out of a guaranteed bump from your employer is worth a second look.
Some employers will even match by more than that, so check in with your HR or payroll department to make sure that you’re getting the most you can.
If you’re self-employed
If you work for yourself you have no employer to match your money going in, which is a huge bummer for the many self-employed New Zealanders out there.
But in the spirit of still saving the most you can for your retirement, I have a tax hack for you instead.
If you’re operating as a company and paying yourself a PAYE salary, the employer side of your KiwiSaver contributions could count as a tax deductible expense.
As always with tax, it doesn’t apply in every situation, so check it with your accountant.
But it’s worth knowing about and seeing if you qualify, because every bit of money towards retirement is worth it.
Sort the fund-amentals
Want to know how I nearly missed out on $200,000? By being in the wrong fund.
This was at the beginning of my career, when I was in a conservative fund, but had the time for growth.
Generally speaking, conservative is good for when you plan to use access your KiwiSaver in the next few years, while growth can earn more, but needs more time – at least five years – to withstand the inevitable ups and downs of the market.
And when I ran the numbers, what would be the difference in my nest egg by the time I hit retirement?
It took me from $200,000, to over $400,000. Just by changing my fund type, no extra money from me.
The main question to ask yourself is: when will I actually need this money?
If you’re using your KiwiSaver to buy your first home in the next couple of years, you probably want stability.
But if retirement is a decade or more away, a more aggressive growth fund is likely to serve you better over time.
The Sorted Fund Finder is a free, independent, easy way to check what you need for your current life stage.
You don’t need to overhaul everything. Just check that what you’re in still makes sense for where you’re headed.
The short version
Log in to your KiwiSaver before June 30. Check you’re on track to hit $1,042.86 in contributions. If you’re not, top up.
- Check you’re putting in enough to get your full employer match.
- Shoot your accountant an email, if you’re self-employed.
- Check your fund type while you’re there.
Fifteen minutes, and you could get back anywhere from $260 to $200,000. Not a bad return on a Monday.
The information in this article is general in nature and should not be read as personalised financial advice.
SHARE ME