KiwiSaver through life: Your 30s 

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…  

• 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.  
   

• 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. 

Key assumptions:  

• 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. 

• 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%  

• KiwiSaver withdrawn at 35 for a first home, with $1,000 remaining at age 35 

• 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.  

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: 

• 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. 

• 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?  

• 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.