Kiwisaver, New Zealand’s national superannuation scheme, has been a cornerstone of financial planning for many Kiwis since its introduction in 2007. However, as life circumstances change, so too may the need to review and potentially adjust your KiwiSaver contribution rate or investment strategy. This article explores the key reasons why you might consider changing your KiwiSaver scheme and offers guidance on when and how to make these adjustments.
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Understanding Kiwisaver Basics
Before delving into the reasons for changing your KiwiSaver scheme, it’s essential to recap the fundamentals. KiwiSaver is a mandatory savings scheme that requires most New Zealand residents and citizens aged 18 to 65 to contribute a portion of their income. The default contribution rate is 3%, but you can increase this to a maximum of 10%. Your contributions are invested in various funds, and the government also provides a member contribution tax credit. To learn more about specific schemes, you can visit resources like Goalsgetter KiwiSaver Scheme.
Reasons to Change Your KiwiSaver Scheme
Several factors may influence your decision to alter your KiwiSaver contribution rate or investment strategy:
Changes in Income:
- Increased Income: If your income has risen significantly, you might consider increasing your contribution rate to maximize your retirement savings. This can be particularly beneficial for those with high-earning potential.
- Decreased Income: Conversely, if your income has declined due to job loss, reduced hours, or other circumstances, you may need to reassess your KiwiSaver contributions. In some cases, it might be necessary to temporarily pause or reduce contributions to meet immediate financial needs.
Life Events and Goals:
- Home Ownership: If you’re planning to purchase a home, you can use a portion of your KiwiSaver funds to contribute to the deposit. However, this will reduce your retirement savings. Carefully weigh the pros and cons of using KiwiSaver funds for a home purchase.
- Retirement Planning: As you approach retirement, it’s crucial to review your KiwiSaver balance and investment strategy. Ensure that your contributions and investment choices align with your retirement goals. If you’re planning to retire early, you may need to increase your contributions or invest in higher-risk funds to achieve your desired retirement income.
- Family Changes: Significant life events such as marriage, childbirth, or caring for elderly relatives can impact your financial situation and retirement plans. Consider how these changes may affect your Kiwisaver contributions and investment choices.
Investment Performance:
- Fund Performance: If your current Kiwisaver fund is underperforming, it may be worth exploring alternative investment options. Consider factors such as the fund’s investment philosophy, risk tolerance, and historical returns.
- Risk Tolerance: Your risk tolerance can change over time. If you become more risk-averse, you may want to shift your investments to more conservative options. Conversely, if you’re comfortable taking on more risk, you might consider investing in higher-growth funds.
Government Changes:
- Tax Changes: The government may introduce changes to Kiwisaver rules or tax incentives. Stay informed about these developments and adjust your Kiwisaver strategy accordingly.
When to Change Your KiwiSaver Scheme
There’s no one-size-fits-all answer to when you should change your KiwiSaver scheme. It depends on your individual circumstances and financial goals. However, here are some general guidelines:
- Review your Kiwisaver regularly: It’s a good practice to review your Kiwisaver balance and investment strategy at least once a year. This will help you identify any areas where adjustments may be necessary.
- Consider significant life events: When major life events occur, such as job changes, marriage, or the birth of a child, it’s an ideal time to reassess your KiwiSaver contributions and investment choices.
- Monitor investment performance: Keep track of your KiwiSaver fund’s performance and compare it to benchmarks. If your fund is underperforming, consider switching to a different investment option.
How to Change Your KiwiSaver Scheme
To change your Kiwisaver contribution rate or investment strategy, you’ll typically need to contact your Kiwisaver provider. They can provide you with the necessary forms and guidance.
Changing Your Contribution Rate:
- Increasing Your Contribution: You can generally increase your contribution rate at any time. Simply notify your provider of the desired rate.
- Decreasing or Pausing Contributions: If you need to reduce or pause your contributions, you may need to provide documentation to support your decision, such as proof of job loss or financial hardship.
Changing Your Investment Strategy:
- Switching Funds: You can often switch between different Kiwisaver funds within your provider’s offerings. However, there may be restrictions or fees associated with fund changes.
- Choosing a New Provider: If you’re dissatisfied with your current provider, you can transfer your KiwiSaver funds to a different provider. There are typically fees associated with transferring funds.
KiwiSaver is a valuable tool for building retirement savings. By understanding the reasons to change your KiwiSaver scheme and knowing when and how to make adjustments, you can ensure that your retirement savings are aligned with your financial goals and life circumstances.
