David Boyle on the 'classes' of KiwiSaver
OPINION: If you are reading this and are one of the 2.5 million people already in KiwiSaver then you can feel pretty pleased with yourself.
But not so fast: there are a few tips and tricks you may be missing out on that could give you an awful lot more to smile about.
Most people fit into one of four types when it comes to their strategy for getting into KiwiSaver:
Did you sleepwalk into KiwiSaver when you started a new job then didn't get round to opting out? If so, your fund and provider were decided for you and you will have landed in their conservative default fund.
It's made a bit of money, but it could have been working a lot harder for you. Congratulations on making regular savings, getting contributions from your employer and, if you have been contributing $20 or more a week you will have received $521 tax credit from the government this year. This option is OK if you're planning on getting your money out soon. For everyone else, it's time to wake up and look at your choices.
The crowd followers
You heard about a good fund from your mum or your best mate. Or you got recommendations from a bank teller or your colleague at work. At least you've shown an interest, but you'd probably be better off doing a bit of leg work yourself. You need to look at your personal circumstances and work out which fund is best for you.
The savvy savers
You've done your homework, worked out your risk profile and used the Fund Finder on sorted.org.nz to narrow down your options. You review your circumstances every year and you don't let wobbles in the market panic you into making rash decisions. Success depends partly on how well you assess your capacity to take on risk and match your goals, but your future is looking pretty solid.
You've gone to a professional adviser and got them to do the work. You probably had to pay for it, but you would have seen the value in getting advice to match personal circumstances with your investment choices.
This a sub-group. You've joined up, one way or another, but you've stopped contributing. No doubt there will be some really good reasons why you have done this but are you aware of the long-term effect on your savings? You may even have forgotten you are still on holiday - which is something you may not be able to do when you finally stop work!
BOYLE'S KIWISAVER TIPS:
- Keep going! Save at least $20 a week and you will get the full $521 tax credit every year. If you can't afford that much, you will still get a proportion of the tax credit as long as you save something each year.
- If you don't know who your provider is, find out.
- If you don't know what fund you're in, ask your provider.
- While you're doing that, ask them to check whether you're contributing 3, 4 or 8% of your income and think about raising it.
- Don't set and forget, but don't change your fund on a whim either. Give your KiwiSaver a little attention once a year to see if it's working for you.
- And if you are really not sure, then get some advice.