This is a message sent to you from your future self, it reads: “Start saving for retirement, now!”.
In your twenties or thirties, you may have other financial priorities that have your immediate attention. However, let’s talk about why putting away small sums such as contributing to your KiwiSaver account on a regular basis will make a big difference to your retirement life.
Yes, we should be making the most out of the present. However, we also need to think about whether we’ll be able to make the most out of each day as retirees.
While most New Zealanders past the age of 65 are eligible for New Zealand Superannuation, according to the Commission for Financial Capability there’s an increasing gap between the standard of living we wish to have when we retire, and the standard of living that we can afford to have by being on NZ Super.
This gap will need to be made up by your retirement savings, like that in your KiwiSaver account.
Retirement is the time when you can do the things you’ve always wanted to do. However, it can also come with a large price tag. You want to be able to enjoy this phase of your life without worrying about where the money is coming from.
1. Employee and government contribution
A benefit of the KiwiSaver scheme is that your employer also contributes at least 3% of your gross salary to your KiwiSaver account and the government contributes $0.50 of each $1 of contributions you make to a maximum of $521.43.
2. Compounding interest
Your returns gained on KiwiSaver are reinvested so your returns can earn returns. The magic ingredient of compounding interest is time. WHEN you start saving, can outweigh how much you save.
3. Life expectancy is much longer now
With more years in retirement, you may need to reevaluate your retirement plan. If you are not prepared, you might just end up running out of money. Although your costs may decrease in retirement due to things like having paid off your mortgage and children moving away, you may still want to have money saved to help you do the things you’ve been waiting to do while being able to meet unexpected costs.
Ultimately, the sooner you start saving the better.
But, it’s never too late to start setting money aside for your retirement. While starting earlier is the best option, starting today is the next best thing. So whether you’re 25, 35, or 55, investing or saving your money now ensures you can maximise your savings and truly invest in your future.
Not only is it important to have retirement savings, but it is equally important that you put your savings into a suitable KiwiSaver fund to suit your situation. Having your savings in a KiwiSaver fund that fits your return requirements and risk capacity can make your savings work for you and you could potentially end up with thousands of dollars more in retirement.
The questions you need to ask yourself are,
Are you currently contributing enough to your KiwiSaver account & does your current KiwiSaver fund suit your investment time horizon?
National Capital specialises in KiwiSaver and investment research with the goal of helping 1 million Kiwis become financially secure. The sooner you can sort out your KiwiSaver, the better your retirement outcomes will be. Don't delay, your future self will thank you.
National Capital wants to help, start by filling out the KiwiSaver HealthCheck.