Looking for a detailed explanation about Kiwisaver and simplicity Kiwisaver Withdrawal? Then read to the end.
What Is Kiwisaver?
KiwiSaver is a voluntary retirement savings scheme set up by the New Zealand government to help New Zealanders save for their retirement.
It is a tax-deferred savings scheme, which means that your contributions and investment earnings grow tax-free until you withdraw them in retirement.
Who Can Join Kiwisaver?
KiwiSaver is open to all New Zealand citizens and permanent residents aged 18 to 65. You are automatically enrolled into KiwiSaver if you are:
- employed by an employer who offers KiwiSaver
- aged between 18 and 65
- not already a member of KiwiSaver
If you are not automatically enrolled, you can join KiwiSaver by contacting a KiwiSaver provider.
If you are under 18, you can only join KiwiSaver if you have the consent of all your legal guardians.
If you are over 65, you can join KiwiSaver, but you will not be eligible for government contributions.
If you are not a New Zealand citizen or permanent resident, but you are entitled to live in New Zealand indefinitely, you may also be able to join KiwiSaver. You should contact Inland Revenue to check your eligibility.
How Does Kiwisaver Work?
KiwiSaver is a voluntary retirement savings scheme set up by the New Zealand government to help New Zealanders save for their retirement.
It is a tax-deferred savings scheme, which means that your contributions and investment earnings grow tax-free until you withdraw them in retirement.
Here is how KiwiSaver works in a nutshell:
- You choose a KiwiSaver provider.
- You decide how much you want to contribute.
- Your employer contributes 3% of your gross salary to your KiwiSaver account.
- The government contributes $521.43 to your KiwiSaver account each year if you contribute at least $1042.86 of your own money.
- Your KiwiSaver provider invests your money in a variety of assets, such as shares, bonds, and property.
- Your money grows tax-free until you withdraw it in retirement.
You can withdraw your KiwiSaver money when you reach age 65. You can also withdraw your money before age 65 if you meet certain criteria, such as buying a first home or becoming permanently disabled.
However, if you withdraw your money before age 65, you will have to pay a withdrawal fee.
What Are The Benefits Of Kiwisaver?
1. Government contributions: The government contributes $521.43 to your KiwiSaver account each year if you contribute at least $1042.86 of your own money. This is a great way to boost your savings and get a head start on your retirement.
2. Tax benefits: Your contributions and investment earnings grow tax-free until you withdraw them in retirement. This means that your money has the potential to grow faster than it would if it was taxed every year.
3. Employer contributions: Your employer is required to contribute 3% of your gross salary to your KiwiSaver account if you contribute. This is a free contribution from your employer, so it’s a great way to boost your savings even further.
4. Early withdrawal penalties: There are no early withdrawal penalties for KiwiSaver withdrawals after age 65. This means that you can access your KiwiSaver savings when you retire, even if you are not yet 65.
5. First home withdrawal: You can withdraw your KiwiSaver savings to buy your first home, but you will have to pay a withdrawal fee.
However, the government also offers a First Home Grant, which can help you cover the cost of the withdrawal fee.
Overall, KiwiSaver is a great way to save for your retirement. It offers a number of benefits that can help you boost your savings and get a head start on your financial future.
Here are some additional things to keep in mind about the benefits of KiwiSaver:
- The government contribution is only available if you contribute at least $1042.86 of your own money each year.
- The tax benefits of KiwiSaver only apply to your contributions and investment earnings. Any withdrawals you make will be taxed as income.
- The employer contribution is only required if you contribute to KiwiSaver. If you do not contribute, your employer will not contribute either.
- The early withdrawal penalty for KiwiSaver withdrawals before age 65 is 20%. This means that you will have to pay 20% of the amount you withdraw in tax.
- The First Home Grant is only available if you are buying your first home and you have been contributing to KiwiSaver for at least three years.
What To Consider When Choosing A Kiwisaver?
There are a few things to consider when choosing a KiwiSaver provider:
1. Fees: KiwiSaver providers charge fees for managing your account. It is important to compare fees before choosing a provider.
You can find information about fees on the provider’s website or in their product disclosure statement.
2. Investment strategy: KiwiSaver providers offer a variety of investment options, from conservative to aggressive. It is important to choose an investment option that is appropriate for your age, risk tolerance, and financial goals.
You can find information about investment options on the provider’s website or in their product disclosure statement.
3. Customer service: KiwiSaver providers offer different levels of customer service. It is important to choose a provider that has a good reputation for customer service.
You can find reviews of providers online or ask your friends and family for recommendations.
It is important to choose a provider that has a good reputation for customer service.
You may want to contact the provider to ask about their customer service policies before you choose them.
Here are some additional things to consider when choosing a KiwiSaver provider:
- Track record: Look for a provider with a good track record of investment performance.
- Transparency: Make sure the provider is transparent about their fees and investment strategy.
- Regulation: Make sure the provider is regulated by the Financial Markets Authority (FMA).
Contributing To Kiwisaver
Here are some tips on how to contribute to KiwiSaver:
- Set a goal. How much do you want to have saved for retirement? Once you know your goal, you can start to figure out how much you need to contribute each month.
- Make a budget. Once you know how much you need to contribute, you need to make sure you can afford it. Look at your income and expenses and see where you can cut back to free up some money for KiwiSaver.
- Set up a direct debit. The easiest way to contribute to KiwiSaver is to set up a direct debit. This way, you don’t have to remember to make a contribution each month.
- Increase your contributions as you earn more. As you earn more money, you can increase your KiwiSaver contributions. This will help you reach your retirement goal faster.
- Take advantage of the government contribution. If you contribute at least $1042.86 each year, the government will contribute $521.43 to your KiwiSaver account. This is a free bonus, so make sure you take advantage of it!
- Make voluntary contributions. If you can afford it, you can make voluntary contributions to your KiwiSaver account. This will help you reach your retirement goal even faster.
- Review your contributions regularly. As your circumstances change, you may need to review your KiwiSaver contributions. Make sure you are still contributing enough to reach your retirement goal.
Investment Options For Simplicity Kiwisaver
KiwiSaver providers offer a variety of investment options, from conservative to aggressive.
The following are some of the most common investment options available in KiwiSaver:
1. Conservative funds: Conservative funds invest in a mix of cash and fixed interest assets, such as government bonds and corporate bonds.
These funds are generally considered to be low-risk, but they also offer lower potential returns.
2. Moderate funds: Moderate funds invest in a mix of cash, fixed interest, and equities. These funds offer a balance of risk and return, and they are a good option for people who are not sure how much risk they want to take.
3. Balanced funds: Balanced funds invest in a mix of cash, fixed interest, equities, and property. These funds offer a higher potential return than conservative funds, but they also carry more risk.
4. Growth funds: Growth funds invest in a mix of equities and property. These funds offer the highest potential return, but they also carry the most risk.
5. High-growth funds: High-growth funds invest primarily in equities. These funds are for investors who are willing to take on a lot of risk in exchange for the potential for high returns.
When choosing an investment option, it is important to consider your age, risk tolerance, and financial goals.
If you are young and have a long time until retirement, you may be able to afford to take on more risk.
If you are closer to retirement, you may want to choose a more conservative investment option.
It is also important to compare the fees charged by different KiwiSaver providers.
Fees can vary significantly, so it is important to choose a provider that charges reasonable fees.
You can change your investment option at any time, so you can start with a conservative option and then move to a more aggressive option as you get closer to retirement.
Here are some additional tips for choosing an investment option for KiwiSaver:
- Talk to a financial adviser. A financial adviser can help you assess your financial situation and recommend an investment option that is appropriate for you.
- Consider your risk tolerance. How much risk are you willing to take with your KiwiSaver money?
- Think about your time horizon. When do you plan to retire?
- Compare fees. KiwiSaver providers charge different fees, so it is important to compare fees before choosing a provider.
- Review your investment option regularly. Your financial situation and risk tolerance may change over time, so it is important to review your investment option regularly and make changes as needed.
Kiwisaver Withdrawal
There are 5 reasons you can withdraw money from KiwiSaver:
- To buy a first home. You can withdraw up to $10,000 from your KiwiSaver account to help you buy your first home. You will have to pay a withdrawal fee of 20%.
- To permanently emigrate. If you are permanently emigrating from New Zealand, you can withdraw all of your KiwiSaver savings. You will have to pay a withdrawal fee of 20%.
- For significant financial hardship. If you are experiencing significant financial hardship, you can apply to withdraw all of your KiwiSaver savings. You will have to provide evidence of your financial hardship to your KiwiSaver provider.
- For serious illness. If you are diagnosed with a serious illness that is likely to result in your death within 2 years, you can apply to withdraw all of your KiwiSaver savings. You will have to provide medical evidence of your serious illness to your KiwiSaver provider.
- For life-shortening congenital condition. If you have a child with a life-shortening congenital condition, you can apply to withdraw up to $50,000 from your KiwiSaver account. You will have to provide medical evidence of your child’s condition to your KiwiSaver provider.
If you are considering withdrawing from your KiwiSaver account, it is important to weigh the pros and cons carefully. Withdrawals from KiwiSaver before age 65 will incur a withdrawal fee, and you will lose out on the potential earnings from your KiwiSaver savings.
However, there may be circumstances where withdrawing from your KiwiSaver account is the best option for you.
If you are unsure whether or not you should withdraw from your KiwiSaver account, it is a good idea to speak to a financial adviser.
A financial adviser can help you assess your financial situation and decide whether withdrawing from your KiwiSaver account is the right decision for you.
Here are some additional things to keep in mind when withdrawing from KiwiSaver:
- You can only withdraw from your KiwiSaver account once per year.
- You must have at least $1,000 in your KiwiSaver account before you can withdraw any money.
- You will have to pay a withdrawal fee of 20% if you withdraw your KiwiSaver money for anything other than buying a first home, permanent emigration, significant financial hardship, serious illness, or life-shortening congenital condition.
- You will not be able to contribute to KiwiSaver again until you have repaid the withdrawal fee.
- You will not be able to get government contributions again until you have repaid the withdrawal fee.
What Is Simplicity Kiwisaver?
Simplicity KiwiSaver is a nonprofit KiwiSaver scheme that is known for its low fees and ethical investment approach.
It is one of the most popular KiwiSaver schemes in New Zealand, with over $10 billion in funds under management.
Simplicity KiwiSaver offers a range of investment options, from conservative to aggressive. The fees for Simplicity KiwiSaver are very low, starting at 0.29% per annum. Simplicity KiwiSaver also donates 15% of its fees to charity.
Simplicity KiwiSaver is a good option for people who are looking for a low-cost, ethical KiwiSaver scheme. It is also a good option for people who want to support a nonprofit organization.
Booster Kiwisaver
Booster KiwiSaver is a KiwiSaver provider that offers a range of investment options, from conservative to aggressive. Booster is known for its low fees and its commitment to ethical investing. ( FAQs on 400 investment banking questions ).
Overall, Booster KiwiSaver is a good option for KiwiSaver investors who are looking for low fees and ethical investing.
However, if you are looking for a wider range of investment options or in-house financial advice, you may want to consider a different KiwiSaver provider.
Kiwisaver Forms
There are two main KiwiSaver forms that you may need to fill out:
- KiwiSaver deduction form (KS2): This form is used to set up your KiwiSaver contributions with your employer. It includes your name, IRD number, contribution rate, and investment option.
- KiwiSaver transfer form (KS3): This form is used to transfer your KiwiSaver account from one provider to another. It includes your name, IRD number, and the details of your new provider.
You can find these forms on websites of the Inland Revenue Department (IRD) and the KiwiSaver providers.
Here are the steps on how to fill out a KiwiSaver deduction form (KS2):
- Enter your name and IRD number.
- Enter your contribution rate. The minimum contribution rate is 3% of your gross salary.
- Choose your investment option. There are a variety of investment options available, from conservative to aggressive.
- Sign and date the form.
- Give the form to your employer.
Here are the steps on how to fill out a KiwiSaver transfer form (KS3):
- Enter your name and IRD number.
- Enter the details of your new KiwiSaver provider.
- Sign and date the form.
- Send the form to your old KiwiSaver provider.
In conclusion, KiwiSaver is a great way to save for retirement in New Zealand. It is a simple and affordable way to save for the future, and it offers a number of benefits that can help you reach your retirement goals.