KiwiSaver through life: Your 30s
KiwiSaver through life: Your 30s
Are you in your 30s and planning for the future? Maybe you already have a KiwiSaver account, or you’re considering joining? Then this handy guide is for you.
Ah, your 30s! Quite the roller-coaster ride, aren't they? You might be moving up in your career, possibly juggling a mortgage, kids, and a busier lifestyle. So, it can be easy to let your retirement savings slide down your list of priorities. But here’s the thing: your 30s are a crucial time to firm up your financial future.
As a 30-something, KiwiSaver serves as a dual-purpose tool – it can help secure the purchase of your first home and/or lay the foundation for a comfortable retirement. And how you manage your KiwiSaver plan today can greatly affect your financial stability ‘tomorrow’.
It all starts with choosing the right KiwiSaver fund for your objectives and circumstances, and then contributing regularly to maintain your savings momentum. This doesn’t need to be a daunting task – let's break it down into some simple steps.
1. Retirement or first home? Both? Choose the right type of KiwiSaver fund.
Financially speaking, your 30s can be a delicate dance of counterweights. Your income is probably increasing, but so are your financial commitments. And while you’re trying to save for your big life goals – like your first-home deposit or a comfortable retirement – sudden expenses keep surfacing. Sound like you?
The good news is that your KiwiSaver plan can be a great ally, if you choose the right type of fund for your primary goal. If your primary goal is…
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Saving for retirement: You still have a long investment horizon ahead of you. Even taking into account your attitude to risk (how you feel about the ups and downs in the markets), a decades-long horizon generally allows you to choose a higher-risk fund (e.g., ‘growth’). Growth and aggressive funds are more likely to have bigger fluctuations in the short term, but they also have the potential to deliver higher returns in the long run.
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Buying your first home: A growth or aggressive fund is probably not a good option in this case. While these funds are likely to recover eventually, it takes time – a lot of time. And as a first-home buyer, you don’t have that benefit. Imagine if your KiwiSaver balance suddenly dropped by 30% right before you needed the money for your house deposit. Any major twists and turns may significantly affect your homeownership goals. So, switching to a lower-risk fund (i.e., conservative or defensive) is worth considering. While this type of funds is not immune to market volatility, they’re likely to provide steadier, smaller returns with less dramatic short-term fluctuations.
Now, what happens when your first home is in the bag? Next stop: retirement! It’s important to review your KiwiSaver plan again, based on a longer investment horizon. Make sure you reassess your risk profile – the combination of how you feel about market volatility, and how much volatility your money can withstand based on your time horizon. Or let our handy digital advice tool recommend an appropriate KiwiSaver portfolio mix for your situation. You may find that you need to switch to a higher-risk fund as soon as possible, to achieve your goals.
The accent here is on ‘as soon as possible’. For illustration purposes, let’s take John, a 35-year-old earning $80,000 and contributing 3% to his KiwiSaver plan. Here’s what John’s KiwiSaver balance at retirement age would look like, if he switched from conservative to growth at 35, 45, 55 or 65. â¯
Key assumptions:
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Assumes that the KiwiSaver member is invested in a growth fund earning 5.5% per annum. This may be too aggressive for a first-home buyer, but is used for comparison purposes.
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Assumes a 35-year-old with a starting salary of $80,000 growing at 3.5% per annum in line with FMA assumptions, contributing 3% and with their employer matching at 3%
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KiwiSaver withdrawn at 35 for a first home, with $1,000 remaining at age 35
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All numbers have been shown as nominal numbers, and therefore not adjusted for inflation.
2. Keep investing
We hear you. You’re juggling many balls at once – mortgage repayments, family expenses, children’s education, maybe even caring for ageing parents. So, it can be tempting to hit the pause button on your longer-term goals.
But, despite the financial pressures you might be experiencing right now, it’s important to keep the momentum going with your KiwiSaver plan. Every KiwiSaver contribution, even small, helps you build a comfortable retirement. Plus, the more your money stays invested, the more you can benefit from compounding returns. This is because, over time, every dollar your KiwiSaver account earns is automatically reinvested to earn additional returns – supercharging your savings growth.
Now, let’s go back to John and assume that he stopped contributing to his KiwiSaver plan after using all his savings to buy his first home at age 35. He only left the minimum $1,000 in his KiwiSaver account, which is a requirement when withdrawing for a first home).
Here’s the difference in savings at retirement if he restarted contributing right away, or restarted contributing at age 45, 55, or 65.
Key assumptions:
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Assumes that the KiwiSaver member is invested in a growth fund earning 5.5% per annum. This may be too aggressive for someone approaching retirement, but is used for comparison purposes.
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Assumes a 35-year-old with a starting salary of $80,000 growing at 3.5% per annum in line with FMA assumptions, contributing 3% and with their employer matching at 3%.
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KiwiSaver withdrawn at 35 for a first home, with $1,000 remaining at age 35
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All numbers have been shown as nominal numbers, and therefore not adjusted for inflation.
3. Make active choices for your future.
As we said before, your 30s is a decade of change, growth, and often, a fair bit of financial pressure. You’re no longer just a passenger in life’s journey; you’re firmly at the wheel. And the active choices you make in this decade can significantly influence the course of your financial journey.
Here are some key decisions to make:
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Actively choose your KiwiSaver fund
As we’ve seen, it’s crucial to choose a KiwiSaver fund that aligns with your financial goals and risk tolerance. Don’t remember ever choosing yours? Then you may be invested in a default fund since you first signed up.
This type of fund was always designed as a holding pen, a safe place for your money until you found a more appropriate fund for your needs. When it comes to risk, default funds are usually ‘balanced’, not too risky but not too conservative either.
While this risk level may be appropriate if your time horizon is short, it might not be a good option if you’re in your 30s and using KiwiSaver to save for retirement. Not quite sure what fund may be right for you? Ask yourself: Does the risk level match my goals, investment horizon, and attitude to risk? You can use our digital advice tool to identify the right type of fund for your individual needs and risk tolerance.
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Choose your contribution rate
With KiwiSaver, you can select your own contribution rate among 3%, 4%, 6%, 8%, and 10%. While some people only contribute 3%, many also don’t realise that the minimum contribution rate is unlikely to give them enough for their goals. So, make sure the contribution rate you choose is in line with your budget limits, but also robust enough to grow your retirement savings at the pace you need. Like to know more?
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Use KiwiSaver to your advantage
As a KiwiSaver member, you can benefit from a healthy boost to your savings, thanks to employer contributions and annual Government contributions.
If you’re employed, your employer will contribute a minimum of 3% to your KiwiSaver balance. Over time, this can add up to a considerable amount, and it’s all extra money that’s helping you grow your savings.
Regardless of whether you’re employed or not, if you’re aged between 18 and 65 and contributing to your KiwiSaver plan, you also receive the annual Government contribution. For every dollar you contribute in the year between 1 July and the following 30 June, the Government adds an extra 50 cents – up to a maximum of $521.43 a year.
Want to maximise your annual Government contribution? Generally, if you’re employed, earning at least $35,000 per year, and contributing at least 3% of your salary – you already qualify for the maximum bonus of $521.43. If you earn less than that, or you’re self-employed, then make sure you contribute $1,043.86 in the year to 30 June.
4. Keep an eye on the fees you’re paying.
Every dollar counts when saving for the future, and that’s why being aware of the fees you’re paying is crucial. Fees vary from provider to provider, and while they might seem insignificant, over time they can eat away at your nest egg.
With approximately three decades until retirement age, make sure you limit the compounding effect of fees on your savings – by selecting a KiwiSaver provider that charges reasonable fees for the service you’re getting. Of course, fees are not the main factor to consider, but it’s a factor nonetheless. Like to know more about our fees? Click here.
5. Review your KiwiSaver plan regularly.
As a 30-something, you have a lot of life ahead of you, and your circumstances will likely change over time. Life events like marriage, starting a family, career progression, or even sudden changes in financial circumstances can always affect your saving ability and risk tolerance.
That’s why regularly reviewing your KiwiSaver plan is vital. It helps ensure that your strategy remains aligned with your evolving life goals and finances.
Too much to think about? Finding a guide – like a financial adviser or a reliable advice tool – can make a lot of difference. They’re there to simplify the process, provide essential insights, and help you make informed decisions about your KiwiSaver plan.
Here at KÅura, we have designed an innovative digital advice tool to provide personalised KiwiSaver advice based on your circumstances and goals – just like a human adviser, but with the convenience of being available anytime, anywhere. Like to try it out? Click here, follow the prompts, and you’ll get a personalised KiwiSaver portfolio in minutes.
Time to set the foundations for your future!
Now that you’re in the thick of life in your 30s, time is still a powerful asset for you. And your KiwiSaver plan can be a great tool to grow your wealth. By optiming your KiwiSaver settings now, you can unlock the full potential of your plan and fuel your journey forward.
Like to see what your future could look like? Use our digital advice tool to crunch your numbers in a few quick steps. Or give the team at KÅura a call at 0800 527 547.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.â¯