Wrap up 2022 feeling KiwiSaver-sorted
There are only a few weeks to go before we turn the calendar to 2023. Want to end the year feeling KiwiSaver-sorted? Here’s a quick guide for you.
1. Calculate how much you need to save for retirement
Not quite sure how much money you need to save? We can’t tell you a ‘magic number’ right off the bat – everyone is different – but we can give you some handy tools and tips to calculate yours. The earlier you run your numbers, the earlier you can take action. So, why not get started here, today.
Now, big numbers can be overwhelming and difficult to grasp, especially when we’re talking about a lump sum that needs to last for 20 or 30 years. That’s why we suggest focusing on the weekly retirement income you’ll need instead.
A common guideline is to save enough to replace between 70% and 100% of your current income, depending on your lifestyle, goals, and future plans. Once you know what you’ll need in weekly income you can consider where it will come from (for example, KiwiSaver) and how to bridge the gap between expected spending and income. Lastly, you can turn your estimated weekly retirement income into a lump-sum KiwiSaver amount – your end goal in dollar figures.
Like to learn more? Have a read of our comprehensive guide “How much do I need to save for retirement?”: it includes simple formulas, tools and rules of thumb to answer this million-dollar question.
2. Make sure that you are in the right type of fund
Having the right type of fund is the most important KiwiSaver decision you make. The right type of fund will depend on your approach to risk (how comfortable you are with the ups and downs of the market) and your investment horizon (how long you plan to have your money invested without needing to withdraw it).
Each KiwiSaver fund has a very different makeup of assets. Growth funds have much higher money allocations to growth assets like shares, real estate and infrastructure while conservative funds have much higher allocations to fixed income products like bonds and bank deposits. Growth assets will typically be more volatile (have more ups and downs), but they’ll usually deliver higher returns over the long term – and vice-versa for conservative funds. Are you in the right fund for your needs and goals? Try the kōura digital advice tool here.
3. Keep your cool when markets are madness
Investors have been on a rollercoaster over the past couple of years. And 2022 has been a particularly rough one for markets. So, how can you keep your cool when the going gets tough?
The reality is that, when things are not going to plan, it’s easy to get caught off guard by our emotional response. But personal instincts are not the best tools for making good investment decisions.
Emotions affect investing in many ways. Sometimes, it’s overconfidence in our own judgement. Other times, it’s our natural tendence as humans to try and fix things, even when they’re outside of our control. For example, when markets drop, your emotions may tell you to protect your savings from falling further by switching to a lower-risk KiwiSaver fund. But doing so actually means selling when the market is low, and ‘locking in’ losses that would otherwise just be ‘on paper’.
In our comprehensive guide “Breaking the cycle of emotional investing”, we talk about some key steps you can take to keep emotions and behavioural biases at bay. These include things like reframing your internal dialogue and setting rules to avoid impulsive decisions.
4. Review your KiwiSaver plan
Time moves fast and everything changes: your life, your goals, the economy, investment markets – you name it. So, it’s a good idea to review your KiwiSaver plan annually and check that everything is working as it should.
We wrote a comprehensive guide about this, “Time to give your KiwiSaver plan a ‘full service’?”. The idea is that, to stay on track on the long road to retirement, you need to check under the hood of your KiwiSaver plan every now and then.
Have a read if you’d like to learn about key bits and pieces that might need your attention: from your contribution rate through to asset allocation, provider’s fees, the type of fund you’re invested in, and the annual Government contribution. These are all key levers that you can pull to tailor your KiwiSaver plan to your needs and goals. And once you’ve sorted your settings, you can mostly sit back and relax – until the next review.
Start here: our digital advice tool
You can use our digital advice tool to check what your KiwiSaver plan is on track to give you, and more. In just a few minutes, we’ll show you:
-
The projected KiwiSaver balance at 65.
-
Your forecast weekly retirement income, including or excluding NZ Super.
-
How much of your current income you’d be able to replace with your KiwiSaver savings.
-
The recommended portfolio for your risk profile, needs and goals.
