Howtosuperchargeyour KiwiSaver

How to SUPERCHARGE your KiwiSaver

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When investments fall invalue, humans like to stick their head in the sand.Yet when that happens it’sa good timetoensure your KiwiSaver bouncesback better.

When marketsbottom out suddenly as they didearlier this year itcan feel like you’velostmoneyforever. That was the case in 1987, 2008, 2020, and now 2022 when we saw major market“crashes” (aka corrections).

Failings in the human braincause people tomake the wrong decisions when markets fall, orgoup irrationally. The human brain wants to invest when prices are high, and stop when they’redown,even though the opposite makes more sense.

Anexample, is howpeoplemovetheir KiwiSaver from growth orbalancedto conservative funds, after marketshave fallen, lockingin the losses. The money doesn’trebound as it would have if itwas keptina growth orbalancedfund.

People who hold their nerve after a majorfall will eventually see their balances reboundtopre-crash levels, providing their investments had been sensible in the first place and not someget-rich-quick scheme.

Historyhas shown that investments leftin balancedorgrowth grow more over 10 years ormore than money inconservative funds, even with these sudden drops.

It will usuallytakea fewyearsfollowing a major crashfor marketstorecover lost ground, although 2020was theexception where it recovered in months.

Another waytosuperchargeyour KiwiSaver inbad years istokeep upregular KiwiSavercontributions, not stop them. You’regetting more for your money when the priceof units you’rebuying is down.

Infact, you might wanttoincrease your contributions.A greatway to do that is to increase the percentage youcontribute before tax. The defaultcontribution is 3 percent ofpre-tax pay, which is matched by your employer. Memberscan choose to contribute 4percent, 6 percent, 8 percent or 10per cent.

Many NewZealanders are upping their regularcontributions. Accordingtothe InlandRevenue Department of those contributingtoKiwiSaver via theirwages or salary,61 percentpay 3percent and the other 39 percent havechosento pay more. Of that 39 percent of memberspaying more, 20.96 percent are paying4 percent and the remaining 18.15 percent havechosentopay either6 percent, 8 percent or 10 percent. The figures were for the yeartoMay 2022.

If you don’t wanttocommit yourself, you can also make one-offorregular additional voluntary contributions. It doesn’t needto bea lot. Even $5 a weekreally adds up.

Set up a regular automaticpayment direct from yourbanktoyourKiwiSaver provider. Or youcan make aone-offpayment via onlinebanking by choosing the IRDpayment option and then “KiwiSaver member account” as yourpayee type. The money will beforwardedtoyour KiwiSaver account.

It’s really importanttokeep uppayments if youpossiblycan when you’re on paid parental leave, unpaid leave, or are receiving ACC or Work and Income benefits. An automaticpayment isa greatway to do this.

Women’sKiwiSaverbalances suffer more from time out of the workforcethan men’s inmostcases. Contributing equallytoboth partners’ KiwiSaver should be part of the parenting agreement between you and your partner.

If youcan’t afford the6 percent that would bepaid into your KiwiSaver if employed,atleast trytocontribute a total of $1042.86 by June 30each year, whichis $20.06ca week.This willensureyou qualify for the fullgovernmentcontributionof $521.43.Start nowfor next year.Nowhere else willyouearna 50 percentreturn on your money before investment growth.

Finally, make sure you’rein the right fund for your long-termgoals. Just be careful if that’s a more conservative fund than you’re inatthe moment,beware of switching when the markets arelow.