Once you turn 65, congratulations! You are now eligible for NZ Super and have access to your KiwiSaver account.
At National Capital, we talk a lot about planning your retirement and sorting out your KiwiSaver account. But what happens to your KiwiSaver account once you hit 65? Do you have to withdraw your entire retirement lump sum? No – you could make partial withdrawals, set up regular withdrawals or even continue contributing to your KiwiSaver account.
Process of Withdrawing your KiwiSaver Funds
If you’ve decided to withdraw your KiwiSaver funds, you’ll need to contact your KiwiSaver provider and complete their withdrawal form along with a statutory declaration. Once you have completed the withdrawal form and signed the requirements, you can look forward to receiving the funds in your New Zealand bank account. The time it takes to process your withdrawal depends on your provider and how much of your funds you plan to withdraw.
When you take out money, it won’t be taxed. This is because you have already paid tax on your investment returns. The amount you withdraw also does not affect how much NZ Super you receive.
One time Withdrawals
If you are making a partial withdrawal, for things like a new car, or home renovations, depending on your provider, it may take up to a week for you to receive your funds. If you are making a full withdrawal, this may take your provider 2-3 weeks to process. Some providers may close your KiwiSaver account if you withdraw all of your KiwiSaver funds, and some may not let you join their KiwiSaver scheme again. As your KiwiSaver account can now act as a low cost, flexible investment option, make sure you consider what your financial needs will be throughout your retirement before making these lump sum withdrawals.
You can also set up regular withdrawals which can act as income streams throughout your retirement. Automatic weekly, fortnightly, or monthly withdrawals are an effective way to handle your lump sum throughout retirement. You will, however, need to consider what activities you will be doing in retirement and how much money you’ll want going into your bank account. Your expenses on activities like travel and leisure activities could be higher in your first years of retirement while medical and healthcare expenses may increase in later years.
Contributions to My KiwiSaver Account After 65
Most providers will let you continue to contribute your savings or make lump sum contributions to your KiwiSaver account after 65. As there is no official retirement age in New Zealand, many New Zealanders continue to work past 65. If you are still working, you will automatically still be making employee contributions unless you request to opt-out (by filling out a KS51 form).
If you continue to work after you turn 65, employers are not legally obligated to make contributions, meaning you may not get these. You will also stop receiving the government member tax credits. There are exceptions to this if you joined KiwiSaver in your 60’s.
If You Joined KiwiSaver in Your 60’s
If you joined KiwiSaver in your 60’s, your KiwiSaver funds will be locked-in for at least 5 years before you can release your funds. For example, if you joined at 63, you would need to wait until 68 to withdraw your savings. In this case, you would still get the employer and government contribution 5 years after you join – even if this is after 65. If you want to access your KiwiSaver funds before the 5-year lock and are able to opt-out, you would stop receiving the govt and employer contributions.
What Should I Do?
Everyone’s retirement goals and situations are different. With the current life expectancy of New Zealanders being 86 for men and 88 for women, we can expect Kiwis to have around 21 to 23 years to spend their KiwiSaver savings. As your KiwiSaver lump sum is part of your retirement income, you may want to think about how you’ll handle these funds effectively throughout the different stages of your retirement. How do you want to spend your retirement?
At National Capital, our Authorised Financial Advisors take into account your current circumstances and your future financial goals when giving you recommendations. Feel free to contact us if you have any KiwiSaver related questions – we're happy to help!