28 Jun Want To Maximise Your KiwiSaver And Accumulate $181,300?

New Zealand used to have a compulsory retirement superannuation scheme where individuals contributed to a long-term locked-in savings plan that would help provide them with a more financially enjoyable retirement.

The fees in KiwiSaver are very low compared to other investments. Also, for every dollar you put in, the government will put in 50c up to maximum of $521 a year. If you’re not in it, you’re missing out on free money.

Let’s take a look at what you could accumulate over your working life based on some very basic assumptions.

Starting – age 25

Retirement – age 65 (40-year working life)

Average salary – $40,000 per year

Contributions – 6% (3% employee and 3% employer) = $,2400 per year

Investment return – 5% compounding interest (Balanced Fund) after fees

Return: $131,302

So you can see the return is not bad. Some would argue that’s not much for 40 years but I would argue that would be fantastic for the average New Zealander to have sitting in their bank come retirement. New Zealanders are some of the worst savers in the western world – how many people do you know have $131,302 sitting in savings come retirement?

I do this for a living and I don’t know many. Also, don’t forget you will also have about another $50,000 of free government contributions as well, so the total now goes to about $181,300. I have also been quite conservative on all the numbers above including the returns. Some of the growth and high-growth funds historically should do better than that.

And here’ the most important tip I am going to give you: The actual power in accumulating a decent fund is in the regular contributions, so start early and stay there – don’t stop, pull out or switch about.

The power of how much you end up with is in your contribution levels just as much as the returns. It’s about 50/50, so don’t get hung up on just the return and jump about different products trying to find a better return.

Get some advice from an authorised financial adviser on what asset investment you should be in (conservative, balanced, growth etc.) and stick with it. Over the term of 40 years, the different choices will provide a big difference to your end balance, so make sure you’re comfortable with the asset choice and stick with it.

Remember, over a long period of time, the highs and lows in the investment markets will average out, so over a long period of time, you can afford to choose a higher-risk investment choice that will go up and down in the short term but should provide a much bigger end result than a conservative or cash fund.

Even if you are self-employed, you can still achieve this result through KiwiSaver – you just won’t get any employer contributions.

Never take any contribution holidays. Once you start, it will become a habit, so it will become easy. Don’t take a holiday because you think you need a break from contributing.

If you can increase your contributions by a tiny bit more, it will provide a massive difference at the end. For example, if you increase your contributions by only $600 a year to $3,000, the end result will now be $164,182 – a difference of $32,880 compared to $131,302

Would You like to maximise your kiwisaver investment so you can retire early? How about buying your new family home? If your answer is “Yes” then call us now at 0800-222-414 or click here to maximise your Kiwisaver.

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