KiwiSaver Series with Matthew D’Souza: Are We Saving Enough? KiwiSaver's $114 Billion Question
Introducing our newest series where our KiwiSaver expert, Matthew D’Souza, answers all of your KiwiSaver questions and provides some insightful commentary on one of our most talked about financial initiatives.
Today, we're diving into a topic that hits close to home for many of us—the future of our finances and the role KiwiSaver plays in securing a comfortable retirement.
Did you know that a whopping 703,000 New Zealanders are currently not contributing to their KiwiSaver accounts? According to a recent report from National Capital, that decision (or oversight) could mean missing out on a treasure chest of nearly $114 billion collectively when retirement rolls around.
Even at the bare minimum contribution of 3% of their wages, those not participating in KiwiSaver are leaving a significant chunk of change on the table. We've also seen a slight dip in the average contribution rates; last year, Kiwis were contributing 4.27% of their income, a tad shy of the 6.3% optimal contribution level financial experts suggest.
The report hints at the cost of living crisis having a huge financial impact. As expected, it seems like the immediate pinch of expenses is making a lot of us choose today over tomorrow, prioritising current needs over saving for the future. 18-24 year-olds in particular are feeling the brunt, standing to miss out on a jaw-dropping $312,004 by the time they hit 65. It's a gradual decrease in potential missed savings as we climb the age ladder, but it's a significant concern across the board.
This has sparked quite the debate: should KiwiSaver be compulsory?
Opinions vary, but there's a noticeable trend towards the affirmative. National Capital also conducted a survey that demonstrated a 62% overall thumbs-up for making KiwiSaver a must, with those over 60 showing the most enthusiasm (about 75% support), closely followed by the youngsters at 68%. It's the middle-aged crowd, juggling mortgages and high living costs, who are a bit on the fence, and understandably so.
Many financial professionals, myself included, believe it's time for a national discussion, led by the Retirement Commissioner and some retirement-savvy experts, to explore this further. After all, there's a nearly $114 billion gap in what could be a more comfortable retirement for many.
So, what's the takeaway from all this?
It's clear that a little more in your KiwiSaver now could mean a lot more down the line. Whether it's about making contributions compulsory or simply getting more of us to voluntarily bump up our savings, it's a conversation worth having. After all, who wouldn't want a bit of extra money to enjoy those golden years?
My recommendation is: don't wait until later! Secure your financial future by making sure your KiwiSaver is set up in a way that works for you. If you have any questions or want some help reviewing your current KiwiSaver fund to make the most of your retirement savings, get in touch with me at matthew@groupplus.co.nz.
About the Author
Having lived on three continents and in six cities, Matthew D’Souza is a citizen of the world! And it is that very background that helps him relate to clients from all walks of life. After catching the advisory bug young, Matthew left a successful career in performance marketing to guide his clients through the financial maze of life. With a special focus on KiwiSaver and financial planning, his aim is to delight every client with the retirement that they dream of. Seeing his clients' success is what drives him and gets him leaping out of bed in the mornings!