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How to Get “Free” Money for Your Retirement

Planning for retirement can be daunting. Too often it’s something to think about later – especially if you have a long time before your “golden years”.

13 June 2023

Liv Lewis-Long says New Zealand’s KiwiSaver scheme offers a valuable opportunity to better secure your financial future, especially relevant in the face of an aging Kiwi population and uncertainty around the future of our government-provided superannuation payments.

As well as offering a consistent way to squirrel away a little of your earnings every pay day, as an employee you can take advantage of your employer being required to match your KiwiSaver contributions (at least to the minimum contribution of 3 per cent and, voluntarily, up to 10 per cent). Add to this the annual government contribution and you have the potential to accumulate a significant nest egg for your retirement.

So, what is the KiwiSaver government contribution and how exactly does it work? Essentially, it’s rewarding you for saving via your KiwiSaver scheme: if you meet the eligibility criteria, the government gives you “free” money up to $521.43 per year via your KiwiSaver account.

For every dollar you add to your account (via employee or voluntary contributions) up to $1,042.86, the government will put in 50 cents up to the maximum contribution – that’s equivalent to a 50% return-on-investment. To get that full amount, you will need to:

  • be enrolled in an official KiwiSaver scheme for at least a year
  • contribute at least $1,042.86 between July 1 and June 30
  • live primarily in New Zealand
  • be aged between 18 and 65
  • not eligible to withdraw your funds

Even if you contribute less than $1,043 in any given year, the government will still match 50 cents to every dollar you save. If you’re a full-time employee, chances are you’ll meet the maximum contribution threshold without noticing. If you’re self-employed, you won’t automatically be contributing to your KiwiSaver (or receiving an employer contribution). Instead, you’ll need to make voluntary contributions to hit the $1,042.86 threshold. You could set up a regular automatic payment or make a lump sum payment(s).

When it comes to saving for retirement, every dollar counts. While the immediate benefit of the government’s contribution to your savings is obvious, the long-term impact on your KiwiSaver balance could be surprising. Over a working life, the government contributions could add up to over $24,500. It’s a game-changer, significantly bolstering your KiwiSaver balance over time. And through the power of compounding interest, the money that you, your employer and the government contribute each year can continue to grow exponentially over the long term.

A no-brainer? I think so.

Liv Lewis-Long is the head of marketing for Simplicity KiwiSaver.

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