KiwiSaver accounts are an incredible long-term investment that set us up for future wellbeing and success. Each pay-cycle, Kiwis contribute a determined rate.The rate Kiwis contribute to their KiwiSaver account is a personal choice, influenced by an array of factors such as financial objectives, income, and individual circumstances.
However, sometimes it can be difficult to make an informed decision on this contribution rate, which is why we have created a guide that will help you make the best choice for you.
Meet the Minimum
It’s important that you contribute at least the minimum required, 3% of your gross salary or wages. This is the recommended standard for everyone. The best part? Your KiwiSaver account will receive double this given that your employer must also contribute a minimum of 3%. A win-win!
While the legal minimum is 3%, financial experts often suggest contributing a higher percentage to expedite your retirement savings. Consider contributing up to 10% of your income if your budget allows. Your future self will thank you for your efforts!
Consider Matching Employer Contributions
Be aware of your employer's contribution rate, as they typically contribute at least 3% to your KiwiSaver account. Some employers may offer more, such as 4% or higher, as part of their benefits package. Strive to match your contribution percentage with that of your employer. That way, you are always maximising your contribution and setting yourself up for long-term success.
Factor in Government Contributions
To maximise the government contribution of $521.43, ensure your contribution is at least $1024. If your annual income is below $34,762, contributing more than the minimum becomes necessary to receive the full government contribution.
Assess Your Retirement Goals
Consider the lifestyle you aspire to have in retirement. Where do you want to live? How do you want to live? By the sea? In the secluded countryside? Or perhaps with family? Calculate the necessary funds for this lifestyle. Adjust your KiwiSaver contribution accordingly to align with your retirement objectives. You got this!
Life happens. Things change. Regularly assess your financial situation, especially when experiencing changes in income or life circumstances. Tailor your savings plan to accommodate your current situation and align with your goals.
Consult a Financial Advisor
Financial advisors are experts at all things money and finances. Seek advice from a financial advisor for personalised recommendations based on your unique circumstances. A financial advisor such as National Capital can assist in creating a comprehensive financial plan that includes the most suitable contribution rate for your KiwiSaver. Submit your KiwiSaver HealthCheck to get their advice.
It's crucial to find a contribution amount that strikes a balance between your current financial needs and long-term retirement goals. Contributing more, particularly in the early stages of your career, can substantially impact the growth of your KiwiSaver fund over time. Once again, your future self will be thankful!