KiwiSaver isn’t just for people who are working as PAYE employees.
If you’re self-employed, you can still make use of the scheme, and leverage it to help you reach your investment goals.
Is it time to check in? Here are some points to think about.
How much you contribute
How much you contribute to your KiwiSaver fund is one of the first questions you’ll have to tackle.
You might like to approach this by thinking about what sort of retirement you’d like, and working backwards from there.
Massey University puts out regular retirement expenditure guidelines, which show roughly what it costs to have a “no frills” or more luxurious lifestyle in a main centre or provincial town.
In the 2023 update, researchers estimated that a two-person household wanting a basic retirement in an urban setting would need $235,000 on top of NZ Super. Wanting a retirement with more choices would require a couple to have saved nearly $1 million.
This may give you a guide to work back from, to determine what you need to save each week, month or year. There are a number of KiwiSaver calculators online that can help with this.
The amount you can afford to contribute may also change over time, and it may be appropriate to check every so often whether you could be putting more aside to meet your retirement objectives.
KiwiSaver or other funds?
Next, you may want to consider how much you will rely on KiwiSaver, and how much you may use other investment vehicles.
People who are employed are often told to contribute as much to KiwiSaver as their employer will match. For example, if your employer will put 4% or more in to your KiwSaver account if you agree to do the same, it often makes sense to make the most of this. (Some employers will put more in without you needing to match it.)
But if you’re self-employed, that won’t be part of your consideration.
It may be a good idea to contribute at least enough to KiwiSaver each year to get the full government tax credit – currently this requires an annual contribution of $1042.86 to get the $521.43.
But after that, you can choose whether you will save the additional savings in your KiwiSaver scheme, or use another investment vehicle, such as a non-KiwiSaver managed fund, where access to the investment is not so restricted.
There can be pros and cons of each, which an adviser can help you to work through.
The rest of your financial picture
As a self-employed person, you also have a business which may become a more and more valuable asset over time. This may well be part of your retirement planning picture.
It may help to work with a professional adviser to develop a succession plan or exit strategy so that you can maximise the value that you have worked hard for.
Don’t set-and-forget
Once you’ve set up your KiwiSaver strategy, make a note to check in on it regularly. The appropriate choices for KiwiSaver – as with other investments – do change over your investing life. We can help you work out whether your settings remain correct, or whether any tweaks need to be made.
Want to talk?
We are here to help answer your KiwiSaver questions, whether that’s about fund selection, provider choice, contribution rate or something else altogether. KiwiSaver can be a significant part of your financial life, and it’s important to manage it appropriately.
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.
