Maxed Out KiwiSaver
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I thought a quick update on KiwiSaver was timely because I’m making a few changes to mine. Yes, I’m going to remind you that we have until the end of the month of June to make sure we have deposited at least $1042.86 into our KiwiSaver accounts, then we will get the government Member Tax Credit (MTC) of $521.43 (which does not count as taxable income).
If you are working for someone else then chances are you have well and truly contributed this amount, but if you work for yourself, you need to add it voluntarily (this is EASY to do, just ring your provider and they will tell you how).
My family have been doing a mixture so are looking forward to our payout from Bill English in July/August when they allocate it to our accounts. That’s $1,042.86 which knocks yet another couple of weeks off the date we can retire. Politicians do tend to give with one hand and take with the other though, I might get some money off them each year but they DID also raise the retirement age this year up to 67. Sods.
This will however be the last year that we are going above and beyond with voluntary contributions to our KiwiSaver. I had been pushing up to $500 per month into both my husband and my funds but last week we reached my tipping point... $100,000 invested across our two funds! We started investing when the fund started back in July 2007 and this is what a simple approach of quiet, steady saving looks like in reality. $100,000.
Balloons and fanfare please!
Why stop now, just when we are really getting going? Having now saved this amount across both of our funds my focus is going to move onto other investments outside of KiwiSaver. The reason is because we won’t be able to access this money for another 24 years because the whole point is that it is for our retirement, which thanks to a change in the rules this year is now at 67. So, what are we going to do in the intervening years for money? I can’t keep locking all of our savings away and my focus now needs to be on investing where the money, should it be needed, is accessible to us.
Any American blog you read talks about “maxing out their Roth IRA” or whatever investment account they have. They put in a certain amount of money because it gives them certain benefits such as tax advantages. They ‘max out’ accounts all over the place! Back here in beautiful NZ we don’t have those options, but we do have that MTC of $521 from the government each year and if we max out our contributions at $1042 they will give it to us.
Therefore, I have now set up our accounts in the following way:
Me: Minimum 3% contribution from my wages into my KiwiSaver along with my employer contribution of 3% - combined this is more than enough to make me eligible for my MTC.
Husband: Minimum voluntary contribution of $90 per month which will make him eligible as well. I’ve set it up to come out of our bank account each month.
Daughter: She will just continue to have $40 a month added to her fund - she is not eligible for any free money until she is 18.
I knew we were getting close to the magic figure I had in my head of $100,000 in KiwiSaver so I asked my manager at work to up my contributions to 8% to get me there quicker. She did this with a couple of clicks in the wages programme that she uses at work. Easy. So, don’t be afraid to muck around with your employee contributions too, you don’t have to lock yourself at a 3% contribution, it can be any number you choose.
Now I’m going to set and forget our KiwiSavers. The balance is going to rise and fall over the next couple of years and I will check on them to note their balance, but that is all I need to be doing. And when one day we turn 67 we will have a tidy sum to look forward to.
Side Note: As luck would have it Simplicity (who I moved our KiwiSaver's to recently) sent me this handy "fee checker" this week. A handy tool for those of you still trying to work out how much you pay in fees with your provider (because they sure as heck are unlikely to tell you).
If you are on a “contributions holiday” then wake up and smell the roses! Year on year you are missing out on money from your employer and from the government. In our case about $15,000 of our total comes from government contributions. Who else out there is giving money away? You personally only need to contribute $20.05 a week, so have a hard think about how you can make that happen. And then make it happen.
KiwiSaver is just one component of my overall financial plan and we still have a way to go yet. So don’t worry, we won’t be buying a campervan, giving it a name like “Retyred N Trippin”, getting a little yappy white dog and hitting the road just yet (or ever!) The money that is no longer going into KiwiSaver needs to be given a job to do and QUICKLY. I want to avoid it wallowing around in a low interest bank account. So, I’m going to be pushing that into the two Index Funds that I have instead (SmartShares US500 and FNZ). I already buy a set amount of them each month so it is just a matter of increasing that amount. I also have figures in my head for the amount I want invested in these funds and when I reach those amounts I’ll work on another area of saving. Also known folks as… diversification.
And I think the family should head out to lunch, mid week, just like other retirees do - just so we can get a feel for it!