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Are KiwiSaver glidepath or lifestages funds right for you?

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Glidepath funds, lifestages or lifetime (age-based) fund options, are a different way to manage your KiwiSaver savings compared to more traditional ways. Glidepath funds have got some media attention over the past few years, and are offered by a few New Zealand KiwiSaver providers such as Fisher Funds Two. In this blog post, you will learn about this more recent approach of managing your KiwiSaver funds and whether investing through a glidepath fund is a good option for you.

What is a glidepath fund?

A glidepath fund is a KiwiSaver fund which changes what assets your KiwiSaver money is invested in depending on your age. To illustrate this point, take Fisher Funds’ glidepath fund for example. At the age of 27, 100% of your assets will be invested in high-volatility, high-return investments. However, when you reach age 67, only around 32% of your assets will be invested in high-volatility, high-return investments.

In a glidepath fund, the younger you are, the more your money is invested into shares and other high-volatility, high-return assets. In theory, this allows younger people to maximise the amount of money they earn from their investments.

However, the older you get, the more your money is invested into low-volatility, low-return assets such as bonds. The reason for this is because in theory it is more important for older people to avoid a large decrease in their retirement savings. After all, they can’t wait a number of years for their portfolio to rise in value again!

Advantages of a glidepath fund

There is one main advantage of a glidepath fund. If you do not wish to actively monitor and change your KiwiSaver fund type, you can simply choose a glidepath fund and it will choose the right amount of growth assets based on your age. 

As a result, your KiwiSaver money will be invested in a way that takes into account your age, a big factor in deciding what to invest your retirement savings into. Because of this, putting your money into a glidepath fund is better than doing nothing and procrastinating.

Disadvantages of a glidepath fund

There is one main disadvantage of a glidepath fund. A glidepath fund only takes into account your age when deciding where to invest your KiwiSaver money. 

They do not take into account other factors such as risk tolerance, your other assets or whether you want to buy a first home in the next few years. Sometimes, in situations like these, it is better to be in a different fund altogether (which is where National Capital can help). Therefore, a glidepath fund might place you in the wrong fund for your specific situation. 

For example, take a 65-year-old man named Jeff. A glidepath fund would put all his savings into a moderate fund. However, this is actually not ideal given how close he is to retirement. Instead, the ideal strategy would be a mix of a Conservative fund (for his short-term needs) and a Growth fund with money set aside for later in retirement. Such planning needs to be done for most Kiwis because glidepath funds are just too simplistic. National Capital can help you with this through our free KiwiSaver HealthCheck.

Who should invest in a glidepath fund?

National Capital believes a glidepath fund is the best choice for those that are unable to receive financial advice. However, if you are able to get advice from trusted financial advisors, we believe you are better off doing that. According to the Financial Services Council, if a 25-year old took financial advice and saved $2,500 per year, they would be $1.5 million better off at 55 than if they didn’t take advice. 

Who offers the financial advice that I need at no cost?

At National Capital, we offer free financial advice for those that are unable to afford financial advice. Through our free KiwiSaver HealthCheck, you can get advice regarding your unique financial situation. We take pride in being a transparent and trusted company, and our team of financial experts will help you become financially secure through our financial advice.

So if you would like to take a hold of your financial future, simply click this link here. Once you’re on that page, take a few minutes to fill out our free KiwiSaver HealthCheck. Your future self will thank you.

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