How to Increase your KiwiSaver
KiwiSaver is an essential tool for retirement planning in NZ, but if you're looking to grow your KiwiSaver balance, there are some smart strategies to help you save more effectively.
Whether you're early in your savings journey or nearing retirement, these tips will help you maximise your KiwiSaver growth. And if you’re uncertain about where to start, please book in a time to speak to us to ensure you're making the most of your opportunities.
Ensure You're Getting Full Employer Contributions
If you're employed, your employer must contribute at least 3% of your gross salary to your KiwiSaver, provided you're also contributing the minimum 3%. Missing out on these KiwiSaver employer contributions means you're missing out on free money that could significantly boost your KiwiSaver balance over time.
Example: Sarah earns $60,000 annually and contributes 3% ($1,800) to her KiwiSaver. Her employer matches that with another $1,800. If Sarah opted out of the scheme her employer’s contributions would stop, meaning less growth in her KiwiSaver. By ensuring she contributes at least 3%, Sarah can maximise her KiwiSaver growth.
Tip: If you're unsure if you're making the most of your employer contributions, consider seeking KiwiSaver advice to review your current situation.
Take Advantage of Government Contributions
The New Zealand government offers a KiwiSaver Government contribution of up to $521.43 every year, provided you contribute at least $1,042.86 from July 1 to June 30. This is one of the easiest ways to boost your KiwiSaver savings with little effort. Don’t miss out on this annual KiwiSaver government contribution!
Example: Tom contributed only $800 during the year. By topping up with an additional $242.86, he could have received the full $521.43 government contribution. Over a 20-year period, that additional yearly credit could significantly increase his KiwiSaver balance.
How Government Contributions Add Up Over Time
Increase Your Personal Contribution Rate
If you're currently contributing the minimum 3%, consider increasing your contribution rate. You can contribute up to 10% of your salary, which can significantly grow your KiwiSaver balance over time. Even a small increase can make a big difference over time due to compound interest.
Example: Matt earns $70,000 and currently contributes 3% ($2,100) to his KiwiSaver. By increasing his contribution to 6%, he would contribute $4,200 annually. Over 20 years, that extra contribution can lead to substantial KiwiSaver growth, particularly when factoring in compounding returns.
Tip: Unsure if you can afford to increase your contributions? Reach out to us for a quick chat and we can provide KiwiSaver advice tailored to your income and retirement goals.
Make Voluntary Lump Sum Contributions
Lump sum contributions are another excellent way to boost your KiwiSaver savings. Whether it's from a tax refund, bonus, or other windfall, a one-off payment can give your KiwiSaver balance an immediate boost.
Example: Jenny is self employed and received a $5,000 tax refund and chose to contribute $2,000 as a lump sum to her KiwiSaver. This not only gives her balance a significant boost but also helps her qualify for the KiwiSaver government contribution for that year.
Switch to a Higher-Growth Fund
Choosing the right KiwiSaver fund is critical to long-term savings. Higher-growth funds are more volatile but generally provide higher returns in the long run. If you have time before retirement, switching to a higher-risk fund may help you grow your KiwiSaver balance more effectively. Book a time to speak with us or take our KiwiSaver Quiz to see if you are in the right fund for you - we will provide you with a no-obligation KiwiSaver recommendation.
Example: John is 35 and has been in a conservative fund. After speaking with a KiwiSaver adviser, he decides to switch to a growth fund. Over the next 30 years, this switch could allow his balance to grow faster, despite short-term market fluctuations.
Tip: Regularly review your KiwiSaver fund choice to ensure it's aligned with your goals. Professional KiwiSaver advice can help you navigate fund selection and market risks.
Growth Potential of different KiwiSaver Fund Types
Consider Partial Withdrawals or Leaving Money in KiwiSaver During Retirement
Once you reach 65, you’re eligible to withdraw your KiwiSaver funds, but that doesn’t mean you should take it all out at once. By making partial withdrawals and leaving the rest invested, you can allow your balance to continue growing, even in retirement. This “bucket approach” helps you maintain an income stream while ensuring your KiwiSaver continues to grow through compounding.
Example: David turns 65 and decides to adopt a partial KiwiSaver withdrawal strategy. Instead of withdrawing his entire balance, he takes out only what he needs each year, leaving the rest invested in a balanced fund. This allows his KiwiSaver to keep growing and provides him with more financial flexibility in his later years.
Tip: Discussing your retirement plans with a KiwiSaver adviser can help you develop a strategy to ensure your savings continue to work for you.
Get Professional KiwiSaver Advice
Taking these steps can help you increase your KiwiSaver balance and set yourself up for a more comfortable retirement. But remember, every financial situation is unique, and there’s no one-size-fits-all approach to growing your KiwiSaver. Speaking with our team to ensure that your contributions, fund choices, and withdrawal strategies are tailored to your individual needs and goals.
If you're ready to make the most of your KiwiSaver growth, reach out to us today and start optimising your retirement plan! Start with one of our quizzes below, or book in a time to speak with us.
Compound Wealth is a KiwiSaver, Retirement and Private Wealth Financial Advice Firm based in Mount Maunganui, Bay of Plenty with clients all over New Zealand.
