This week, financial commentator Janine Starks wrote an opinion piece titled Why you’re probably investing too much in KiwiSaver:
The question is raised because your savings are essentially locked-in until you turn 65 years of age. Special rules ensure KiwiSaver funds held through to retirement, with some exceptions around first home purchase and financial hardship. Janine has observed that for those suffering financially during Covid-19, accessing KiwiSaver was particularly hard.
The key is to ensure that you get the benefits of your KiwiSaver scheme, through the annual government contribution and employer contributions. In addition, the ability to access your funds to put towards a deposit for your first home and the First Home Grant is a significant benefit.
Beyond this, there are alternatives that provide a more flexible approach to building your savings for retirement, without locking them in. Janine observes that once you consider investment options outside KiwiSaver, “a whole world of managers opens up. Like a kid in a lolly shop, you get access to all the flavours. It’s called diversification, and it’s the gateway to both control of your own emergencies and the option of early retirement.”
Managed funds provide alternatives with many of the benefits that underpin your KiwiSaver scheme:
- Investors’ money is grouped to create a single fund for the purchase of a pool of investments
- Providers are licensed under the Financial Markets Conduct Act. This means that the Financial Markets Authority licenses the fund manager and their supervisor and monitor whether they are meeting the standards required by law
- Funds are held in trust meaning that there is a separate supervisor making sure that the funds go where the provider says they will
Feel free to contact me if you would like to discuss whether your investing too much into your KiwiSaver.