If you’re getting closer to 65, or maybe you just like to plan ahead, you might be thinking about what happens to your KiwiSaver plan once you hit the big 6-5.
Apart from first-home and financial hardship withdrawals, age 65 is the first time most people can access their KiwiSaver money. But unlike many think, that doesn’t necessarily mean the end of your KiwiSaver journey.
In fact, there are ways to use your KiwiSaver plan during retirement, to fund your golden years. Here’s how.
You don’t have to de-risk immediately
It’s a common misconception that people nearing retirement (or in retirement) need to shift all their money out of growth assets into something more conservative.
The theory is that this would protect them from a scenario where their investments hit a weak point in the market just as they clock out of work for the final time, or when they no longer have a fixed income to rely on.
But retirement is itself a long journey. When you reach 65, you could easily have three decades (or more) of life ahead of you, and you need your money to last as long as you do. That probably means only de-risking the money you need right now, and giving the rest of it an opportunity to continue accumulating long-term gains.
Yes, you can keep investing
There’s no rule that says you must remove your money from KiwiSaver when you hit 65. You can leave your investments in the scheme, and just take out what you need as you need it.
Keeping your money in a managed fund such as KiwiSaver can be a good way to head off inflation, which can erode the value of money in a savings account quite quickly. A managed fund should outpace inflation over the long run, even though there may be some volatility in the short term.
You don’t have to withdraw all your money at once
It’s important to stress that, when you decide you do want to tap into your KiwiSaver account, you don’t have to take the full amount in one hit. Once they’ve checked that you’re eligible to withdraw, providers will let you take the amounts you need when you want them. That might mean withdrawals here and there, or a steady flow of regular payments from your fund to your bank account. Once you’re 65, KiwiSaver becomes quite a flexible investment option.
You can still make contributions
If you decide to postpone retirement and work a few more years past age 65, you can keep making contributions to your KiwiSaver account for as long as you like. You will no longer receive the annual Government contribution, and you might find that your employer contributions also stop – but that may be something you can negotiate as part of your employment agreement.
Advice will help
Making your money last, whether that’s in KiwiSaver or other investments, can be a challenge for retirees. We can help you work out an investment plan to keep your money working hard until the moment you need it. For lots of people, a “buckets” approach works well – with buckets for the money needed now, in the medium term and in the long-term all invested at appropriate levels of risk for the time horizon.
Like to talk?
KiwiSaver can be a great tool to help create a great retirement. If you’re wanting to make sure you’re on track – or put a plan into action as you near 65 – get in touch with us today. We would be happy to help.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.
