Author: James Hurwood
Taking the time every now and then to check your KiwiSaver could end up making a significant difference to the size of your retirement nest egg. This is especially true if you’re one of the thousands of people who made a hardship withdrawal due to COVID-19. A check now could help you identify strategies for getting things back on track.
Here are four KiwiSaver health-check steps to consider, no matter what your KiwiSaver stage of life:
1. Check your KiwiSaver fund’s performance
The extent to which your KiwiSaver balance is growing is arguably the biggest factor in determining how financially comfortable you will be in retirement. If you are working, generally, your employer must contribute regularly to your chosen KiwiSaver account. You can also adjust the level of your personal contributions. But just as important is how fast your KiwiSaver is growing due to investment returns.
Your chosen fund invests your retirement savings on your behalf with the aim of growing your balance. However, funds can vary significantly in what they deliver in investment growth. So, it’s important to keep an eye on how well your fund is performing.
You can do this by checking your KiwiSaver statements for performance information. Canstar’s KiwiSaver comparison tables are also a good way to judge how your fund compares to other providers on our database.
For more information on the subject, check out our story: Keeping Track of Your KiwiSaver Balance & Contributions.
Remember, KiwiSaver is a long-term investment. Paying attention to performance over a longer time frame, such as a five-year instead of a one-year period, can give you a better idea of how well your fund is positioned to deliver growth.
That said, investments can go up and down over time, so a strong past performance isn’t necessarily indicative of good future returns. This means it’s important to consider performance alongside other factors, which brings us to our next tip …
2. Check your KiwiSaver fund’s fees
KiwiSaver funds charge a range of fees to their members. These can include administration fees and investment costs, which should be listed on your KiwiSaver statement.
When you see the amount of fees you’re paying, it might not look like a massive amount when compared against your returns. But over time fees can eat away at your balance and limit the amount of money that’s earning investment returns for you.
What may look like a small percentage difference in the fees charged by different KiwiSaver funds can potentially translate into tens of thousands of dollars of retirement funds saved or lost by the time you’re eligible to cash in your investments.
You can compare the fee levels charged by KiwiSaver funds on Canstar’s database, using our comparison tables. If you feel like you’re not getting good value for money from your fund, it could be time to consider shopping around.
For more on the subject of fees, we’ve our article: KiwiSaver Fees vs Returns: Are You Getting True Value?
3. Evaluate your investment options
It’s never a bad time to ask yourself if your KiwiSaver is being invested in a way that suits your life stage, appetite for risk and even your values and ethics.
Most KiwiSaver funds offer their members a range of options for how their savings are invested. These options can include growth, balanced, conservative, or a life-stage option, which changes your investment mix as you get closer to retirement.
Many funds also allow members to tailor their investments to focus on particular sectors or asset classes, such as property or bonds. You may even have the option of setting up your investment mix to only invest in ethical companies, or to filter out certain industries that you want to avoid. Common examples can include companies involved in the extraction or processing of fossil fuels, or the gambling industry.
Whatever approach you take, it’s important to consider the possible implications different investment options could have on your retirement. For example, could your investment choices mean greater certainty but more modest returns? Or potentially higher returns but more risk? It could be worth speaking to a financial adviser to help you answer these questions.
To read more on working out which investment options are best for you, try reading our story: KiwiSaver: Which Fund Type Is Right For Me?
4. Think about other KiwiSaver opportunities
- Do you have any retirement funds sitting in accounts overseas, for example in Australia? It’s not too difficult to have your funds transferred across the ditch and you’ll save paying multiple fees and charges. Talk to your KiwiSaver provider about the process and check on the possible tax implications
- Could you contribute more by making extra contributions? Currently, you can contribute: 3%, 4%, 6%, 8% or 10% of your before tax pay
- Take a closer look at your pay slip to make sure your employer is contributing the appropriate amount of KiwiSaver
- Escape the default fund. If you don’t choose your own KiwiSaver scheme, and your employer doesn’t have a preferred scheme provider, Inland Revenue will choose one for you from government-appointed default providers. Currently default schemes are conservative. However from June 2021, new default KiwiSaver accounts will be place into balanced funds. Either way, if you’re still in a default scheme it’s time to make an active decision about your KiwiSaver options
- Would it be beneficial to set a reminder to check in on your KiwiSaver again in a few months, or even the next time you get a statement from your fund? A regular check-in could well help you stay on track for the retirement you want
Check your KiwiSaver: it’s your choice
When it comes to checking your KiwiSaver, the responsibility is all yours! If you take the time to review your KiwiSaver and to compare it with other providers, you’ll soon have a clear picture of whether you’re happy with your choice.
Ultimately, the more informed you are as a KiwiSaver investor, the better the decisions you’ll be able to make, which should help you build more funds towards retirement or that all-important first-home deposit.
And this is where Canstar can help. Our KiwiSaver dynamic comparison tables put all the information you need at your fingertips, from average five-year returns to fees.
So if you want to discover if you’re getting true value from your KiwiSaver, start comparing providers today by hitting on the button below.