KiwiSaver advice

[Hoon]

This post is aimed at other Kiwisaver interested people who have done the research and signed up or are thinking about it – I’m not really interested in any advice from the uninformed grudge-bearing doom-sayers out there. The Govt is throwing $3.2 billion of taxpayer money into KiwiSaver, money for the taking and I’m grabbing my piece of it!

OK, My mum turned 60 in the weekend and this really got me thinking as I’m 36 and have no retirement plan. When I got home I did some research surfing up on KiwiSaver, then next morning I went to Whitcoulls and bought the $10 Mary Holm KiwiSaver advice book. My plan is to pay the minimum amount necessary to gain maximum benefits. Any retirement savings above that I intend investing elsewhere so I’ll have access to the money.

So say I’m on $60K, if I pay $20 p/w (or $1042 by Apr 08), I also get the max $1042 p/a from the Govt tax credit and 1% ($600) from my employer which ramps up to 4% in 4 years time.

Doing the Math:

Year	Me	Govt	Employer	Total Contributions for year
2008	$1042	$1042	$600		$3684 (incl $1000 Govt kick-start)
2009	$1042	$1042	$1200		$3284
2010	$1042	$1042	$1800		$3884
2011	$1042	$1042	$2400		$4284

So for my $1042 I’m getting an extra $2-3K a year. Over 4 years, my $4168 becomes $15136 (not including interest). Does this sound right and similar to what others have worked out? Can I get away with only paying $1042 a year through a combination of 4% plan, contribution holidays and lump sum payments, or do I have to meet the Employers contributions?

Also my Mum who just turned 60. If she starts before Apr 08 at $20pw, in 5 years time she will get $11420 for her $5210 not including any employer contributions or returns!

[degrom]

You sure you can just pay $20 a week... I thought it was 4% of your income... on 60k its about $150???

[RC1]

i think $20 is the min amount?? if your on $60K surely you could save a bit more than $1040p/a cant you ? and put it in a high interest account thats what i would be doing, im not going near kiwisaver not worth it imho

[Oakie]

Yeah, you need to pay 4% or 8% so $60000 =$46.14 per week. I'm not too sure where the $20 comes in but that may be additional voluntary deposits you make.

It's not about meeting the employers contributions. You have to pay a set rate, so do they. Eventually they will pay 4%.

The only thing I would suggest is that you wait a shgort time before jumping in. The bits about the employers contribution and the government tax credit to employers aren't actually law yet so it is possible (although unlikely) that these may change. We'll know by the end of October.

If you are 36 and on $60000, if you joined a KiwiSaver provider under a 'balanced scheme you would expect between $214000 and $219000 payout.

Have a look here http://www.consumersaver.org.nz/ and go to Step 3, Compare Schemes. It is a great tool that lets you define not only salary, age and percent, but also the type of investment you want. If you want my opinion, the returns it lists by company are all pretty close. The big difference is in the security rating. That's the figurte I'll be using to pick my provider.

[Hoon]

i think $20 is the min amount?? if your on $60K surely you could save a bit more than $1040p/a cant you ? and put it in a high interest account thats what i would be doing, im not going near kiwisaver not worth it imho

Yep I could/will save more but under kiwisaver once you go over $1040p/a you don't get anymore freebies so you might as well invest that extra money elsewhere like you say. This is really an exercise on what is the most one can get for the least amount.

You sure you can just pay $20 a week... I thought it was 4% of your income... on 60k its about $150???

Yes it is either 4% or 8% but I *believe* you can take a "contributions holiday" and stop paying altogether. So you could pay 4% for say 3 months then take a break, or you could just stay on a "contributions holiday" permanently and pay a lump sum come March 31st to meet the $1042 p/a. This is what I'm unsure about and need confirmation. Either way I'm not too fussed as the free money gained is still the same.

[Oakie]

i and put it in a high interest account thats what i would be doing, im not going near kiwisaver not worth it imho

Even if your high interest account gets you 10% / 12%, that doesn't go anywhere near comparing with a scheme in which you get an equal contribution put in at the start (100%), and then get interest on top of that.

Kiwisaver is not for everyone but I'd suggest the rate of return can't be a valid reason. The difficulty in getting funds back early I would accept as a valid reason not to join.

[RC1]

just saying not for me as im a kept man and dont have a income for the next 4yrs

[Coldrider]

Don't forget to factor in the FEES that brokers take on the deal/ administration, they vary from provider to provider. This will take abit of homework as well.

[NighthawkNZ:Me]

Don't forget to factor in the FEES that brokers take on the deal/ administration, they vary from provider to provider. This will take abit of homework as well.

and the run of failing finance companies lately...

[Str8 Jacket]

Yes it is either 4% or 8% but I *believe* you can take a "contributions holiday" and stop paying altogether. So you could pay 4% for say 3 months then take a break, or you could just stay on a "contributions holiday" permanently and pay a lump sum come March 31st to meet the $1042 p/a. This is what I'm unsure about and need confirmation. Either way I'm not too fussed as the free money gained is still the same.

Yes you can BUTyou need to be making payments for xxx amount of time before you can take a holiday. Also be aware that the Govt take back there (ours) $1000 if you "pull out" early. Apparently no one likes it when you pull out early....

Its all on the info that your employer gives you so it must be on the website?

[Coldrider]

You can just pay the minimum for the minimum time to get your $1000's from the govt, you can borrow against it, the govt knows this but isn't fussed as it still encourages savings, something we don't do too well as we always update our MB's first.

[ManDownUnder]

Avoiding the calcluations etc for a second... here's a few things I have in mind.

• Once you sign up you can't quit till you're retired
• Your employer will possibly take their mandatory Kiwisaver contributions into effect when giving you the next payrise (i.e. if they have to put in 2% of your annual salary, they might give you 2% less payrise - and how would you ever know?)
• Who's to say the investment schemes are going to pay dividends at all in the long run?
• It's a new, big, complex system where loopholes are yet to be found and exploited (and clamped down on), and problems yet to really manifest themselves.

I think that's it... otherwise I agree with getting in as soon as you can for all you are worth.... Tui anyone?

[LilSel]

Im already contributing 2% of my salary & my work is contributing 2% also (got 2% rise & could either opt in early or opt out till it becomes compulsary).
I dont notice the deductions, it goes before I can get my hot little hands on it. If I dont ever get another pay rise in the next 42years, based on what im earning at the moment, when I reach 65, I will get over half a million!!! shit thats something to look forward to... albiet that it is 42 years away!

There was something in Fridays paper (NZ Herald) that had comparisions between the govt approved providers etc... There is also a website that you can visit to find out what fund/provider will benefit you most.

Here is the linky to the calculator etc...

There is a fair bit of choice out there.

[LilSel]

• Once you sign up you can't quit till you're retired -you can take a 5year contribution holiday (consecutive) so basically if at 60 you wanna retire early, you can take the holiday then and still get paid out the 1000 you got as a headstart many moons before...
• Your employer will possibly take their mandatory Kiwisaver contributions into effect when giving you the next payrise (i.e. if they have to put in 2% of your annual salary, they might give you 2% less payrise - and how would you ever know?) -The could do... I however got a 5% rise plus the WHOLE company got an additional 2% that we could choose to either have as cash in hand (taxed) OR start kiwisaver early and not get taxed on it

Thats all I have to add lol ... Being that I am still 42 years off retiring, I figured it wouldnt hurt to start it up & forget about it, if I dont make it to 65 for some reason, at least the funds that I have saved will go to my children/family anyways...

[avgas]

Avoiding the calcluations etc for a second... here's a few things I have in mind.

• Once you sign up you can't quit till you're retired
• Your employer will possibly take their mandatory Kiwisaver contributions into effect when giving you the next payrise (i.e. if they have to put in 2% of your annual salary, they might give you 2% less payrise - and how would you ever know?)
• Who's to say the investment schemes are going to pay dividends at all in the long run?
• It's a new, big, complex system where loopholes are yet to be found and exploited (and clamped down on), and problems yet to really manifest themselves.

I think that's it... otherwise I agree with getting in as soon as you can for all you are worth.... Tui anyone?

Its interesting that we both came to the same conclusions without ever talking to each other.
I still don't know why they say that you must invest a minimum of 4% either - considering that interest rates on loans have gone up the proportional amount.
Also 2 days after kiwi saver starts up investment firms go into the pit of despair?