How to withdraw your KiwiSaver funds without wasting it

Co-author: Michelle Norton
When you’re in KiwiSaver over 65, you’re fully entitled to the savings, but consider some longer lasting alternatives to a lotto-style blowout.

KiwiSaver over 65: Saver vs Splurger

winning the lottery

Landing a KiwiSaver payout may feel like winning Lotto to many people. As many as 29% of eligible 65+ retirees have withdrawn the lot as soon as they had the chance, according to the Commission for Financial Capability’s 2016 survey of KiwiSaver providers.

Commission seminars regularly meet retirees who simply don’t know what they can or should do with their retirement savings. David Boyle, Commission Investor Education Manager, says it’s a misconception that you have to withdraw all your KiwiSaver money when you turn 65 – you don’t.

Many providers allow for the option to draw down an income stream or regular payments when a KiwiSaver member decides they’re ready to retire, or at least ready to transition to retirement. The beauty of still being in KiwiSaver over 65 is that it’s your savings, so your choices for how to withdraw KiwiSaver can be adjusted to suit your individual needs as a retiree.

Of course, some will still think the best option for withdrawing their KiwiSaver is to use it all for overseas adventures, and others will put the money towards the bach or the boat they’ve always dreamed of.

But not all investors will compare being in KiwiSaver over 65 years of age to hitting the jackpot, especially if they’re used to budgeting and investing. So don’t rush in – find out your options before deciding how to spend your nest egg.

How to withdraw KiwiSaver funds – or not – to boost your savings

You can have your cake and eat it, too, by maximising your KiwiSaver funds even once you’ve retired:

  • Leave the money where it is in the KiwiSaver fund of your choice, and make small regular withdrawals to supplement your New Zealand Superannuation payments. This is what 62% of eligible retirees did in the 2016 survey.
  • Invest the money in income-bearing investments such as bonds, shares, or units in managed funds. These are likely to pay a higher rate of income than investments aimed primarily at capital growth.
  • Buy units in a “pension” or “income” fund. This would be a managed fund aimed at retirees that pays a regular income stream.
  • Buy an annuity. An annuity is like an insurance policy that agrees to pay a certain amount each month until you die, no matter how long you live. These are very rare in New Zealand.
  • Withdraw KiwiSaver and put it in the bank in your savings account or a term deposit.

Mistakes to avoid for KiwiSaver over 65

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Blowing the money Lotto-style isn’t the only mistake retirees might make with their KiwiSaver “pot of gold”. Other common retirement mistakes include:

  • Not doing a budget. It’s a natural human trait to want to buy luxury toys after a lifetime of hard work. Figure out how to withdraw KiwiSaver to split between a few luxuries and a long-term budget plan. Aim to make the money last and make a budget you can stick to.
  • Being too cautious. Making the money last requires that retirees invest in a mix of growth, balanced, and conservative investments. Only 2 to 3 years’ worth of spending money should be in cash-like investments such as savings accounts. The next 6 to 9 years could be invested in bonds (also called debt securities), and the remainder in growth investments such as shares and property to make the capital last longer. Of course, each retiree’s situation is different and we have not taken into account your individual objectives, financial situation, or needs, so consider whether this advice is right for you before making a decision.
  • Giving into friends and family. It won’t be long before friends and family come to realise that being in KiwiSaver over 65 years of age means the saver is in line for a large lump-sum payment. Sadly, some families will put the pressure on their folks to use that money for everything from paying off their kids’ debts to investing in a sibling’s business.
  • Paying off consumer debt. The mistake here is not that you want to find out how to withdraw KiwiSaver to pay off debt – it’s having the debt in the first place. Anyone nearing retirement should have paid off their consumer and mortgage debt before they finish work. For our tips on how to kill your debt faster before retirement, read this article
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