Kickstart your KiwiSaver in 2019
January is a time to take a look at your life and see where you want to make improvements. From eating better to getting fitter or losing weight the list is long.
But for millions of people, money is the biggest concern.
With this in mind, I have come up with five tips KiwiSaver members can use to help bolster their savings accounts. Now is as good a time as any to think about how you are invested in KiwiSaver and take positive action on what will be one of your biggest and most important assets in the future.
Here are Compound Wealth’s top five tips on how to Kickstart your KiwiSaver in 2019:
1. Make sure you’re in the right KiwiSaver fund appropriate to your savings goals and timeframes
Most KiwiSaver providers offer a range of investment funds, so we can select which one our savings go into. There are five main types of KiwiSaver fund:
Aggressive
Growth
Balanced
Conservative
Defensive
To maximise your KiwiSaver fund, it’s a good idea to choose the right type of investment appropriate to your savings goals. For instance, if you’re more than 20 years away from retirement, or not planning to make a withdrawal soon (e.g. for your first home), a growth fund might be the best choice for you. Note that a higher proportion of growth assets typically means greater ups and downs in value, with the investments more likely to produce a negative return in any year.
If you’re planning on making a significant withdrawal from your KiwiSaver once you reach 65 or withdraw your funds for your first home within 5 years, you might be better suited to have your KiwiSaver in a more conservative type fund.
A simple change in the type of investment fund you put your savings into could add thousands to your KiwiSaver balance, without you having to do a thing.
2. Check your contribution rate
Contributing more to KiwiSaver is a great way to boost your numbers. Raising your KiwiSaver contribution rate to 8 percent from 3 percent or 4 percent could give you hundreds of thousands of dollars more in retirement. Most of that money will likely come from market gains over the years, so the more you put in and the more time it has to grow, the more you’ll have thanks to the power of COMPOUNDING. Contact your employer to increase your KiwiSaver contribution rate, your future-self will thank you.
3. Remember it’s a long game
If you are investing for the long haul, as most KiwiSavers are, it pays to ignore short term market movements and invest for long term growth.
The trouble is, fighting your emotions while investing isn’t easy. Loss aversion tells us that humans are hardwired to hate losses twice as much as we enjoy gains, and this fear of losses can lead investors to make bad decisions that seriously impact their long term returns.
If you are investing for the long haul it pays to look past all the short term noise and focus on contributing regularly and investing for growth. Make the most of Dollar Cost Averaging and embrace market volatility in the short-term because it will only benefit you down the road.
4. Have a retirement income goal in mind
What do you want your retirement to look like? Is it to be able to travel overseas regularly, have a bach by the sea or to just live within your means. Many people give little thought to how they will spend their time in retirement, but you should. After all, the biggest use of your time in the years leading up to retirement — working — will be no more.
Here are a few questions to ask yourself as you begin to paint a picture of your retirement future:
When do you want to retire?
What annual income would you like to receive in your retirement years?
What does the value of my savings/investments need to be in order to draw this income?
5. Diversify
Most Kiwis are unaware they are already well invested in the New Zealand market.
Your house, your job, your bank deposits – these are already tied up in New Zealand-based investments, so considering where your KiwiSaver account is invested is important. Having it invested in different asset classes such as international shares can provide some protection against major shocks to the domestic economy.
Take a look at where your KiwiSaver scheme provider invests its funds, and understand the benefits of different investment approaches.
If you have any questions or would like to discuss your current situation please feel free to email me at adam@compoundwealth.co.nz or phone +852 530 353 84. Alternatively you can complete a KiwiSaver fact find process here, where i will send you a free KiwiSaver analysis and recommendations report.