It might feel like retirement is 1,000 years away, plus it’s so much easier to just not think about it at all, but it really is time we started paying attention to where we put our money.
According to research, young New Zealanders are missing out on tens of thousands of dollars because we’re not investing our KiwiSaver wisely. So let’s bust some common KiwiSaver myths and add a couple more zeroes to our retirement plans.
Myth 1: I don’t need to think about KiwiSaver until I’m really, really old.
So not true – you want to be thinking about KiwiSaver as soon as you’re 18 and start working. Because of the way time and long-term investing work in tandem, the earlier you start, the better results you’ll see. We’re talking about hundreds of thousands of dollars difference!
Myth 2: Isn’t it just a super boring savings account?
Nope. KiwiSaver is an investment account with a lot of cash going into it besides just yours: 3 per cent from your employer, and as much as $521 each year from the government. And because it’s being invested into stocks and bonds (on your behalf, by a fund manager) you also get back investment returns.
Myth 3: I have to sign up with the provider my employer tells me to.
No way. Once you figure out the KiwiSaver fund that’s right for you (see fundfinder.sorted.org.nz), you can easily sign up with whichever provider you pick. Switching your KiwiSaver is easy too, but more on that later.
Myth 4: I should just join whatever KiwiSaver my bank has.
When it comes to choosing your KiwiSaver, don’t just base your choice on a familiar brand. Or pure convenience. You need an independent view on everything out there (which is why there’s fundfinder.sorted.org.nz), followed by an informed decision on which fund suits you best. You’ll get much better results that way.
Myth 5: I don’t have a job so I can’t sign up to KiwiSaver.
Actually, you don’t need to be employed to sign up, and you can be self-employed, too.
Myth 6: I have no idea what KiwiSaver does so I should just play it safe and leave it in a conservative fund and not think about it.
Finding the right type of fund for you - like a ‘growth fund’, for example - is easy. It depends on just two things: how soon you need your money back, like for a house deposit, and how much you can weather the ups and downs of the market. (Like any investment fund, KiwiSaver accounts can go down in value too.) Basically, the more time you have before you need the money, the more risk you can afford to take, because you have time to ride out those ups and downs. Answer these three questions to find the type that suits you best.
Myth 7: Free money from the government... really?!
As free as it gets: the government will give you 50 cents for every dollar you put into your KiwiSaver, up to $521 each year. To get the full five hundy, you need to put in $1,043 over the year, which works out to about $20 a week.
Myth 8: I can’t change my provider or contribution amount once I’ve joined.
You can! You’ve got options! Switching your KiwiSaver is as easy as switching mobile companies. That said, it’s less fuss to find the fund that’s right for you and stick with it.
On that note, if you’re employed, you can contribute 3%, 4% or 8% regularly, but anyone can throw in some extra cash as a lump sum, too. Talk to the person in charge of payroll about adjusting how much you contribute to your KiwiSaver.
Myth 9: I can’t touch dat ca$$h till I’m 65 :(
Wrong: You can get your money out to use for a house deposit after just three years. And if you run into especially tough times, you can get some of your money out to help you get by. But remember the purpose of KiwiSaver is a stash that keeps growing in the long run.
Myth 10: Yeah, but it’s impossible to claim funds for “hardship”.
Lots of us fall on hard times – life happens! So each KiwiSaver provider has a hardship claims process in case you need it. Of course, you’ve got to be able to prove that you’re for real and not just trying to drop it on a car or iPhone.