For young New Zealanders who haven't invested outside of KiwiSaver, terms like risk or volatility can result in them selecting conservative or balanced funds that don't correctly correlate with their extensive investing horizons. So while they may think they are doing the right thing at the time, their protective approach and reduced exposure to growth assets could significantly reduce how much money they have at retirement.
Let's run the numbers using a KiwiSaver Retirement Calculator.
Tipene is 27, already owns his own home, and is now using KiwiSaver to help financially prepare for retirement. He's a Quantity Surveyor in Gisborne, earning $90,000 a year.
If Tipene selects a balanced fund with only a 50% exposure to growth assets, based on average annual net returns of 3.9%, his estimated retirement balance would be $1,603,757.
Alternatively, assuming Tipene is comfortable with a higher level of volatility, if he selects an aggressive fund with a 98% exposure to growth assets, based on average annual net returns of 6.6%, his estimated retirement balance would be $2,832,349. That's a big difference of $1,228,592.
As with any significant financial decision, education prior is critical. We're qualified financial advisers who have helped hundreds of New Zealanders make better KiwiSaver decisions. In addition, our detailed KiwiSaver recommendations are fee and obligation free.
This article is for informational purposes only and should not be considered as financial advice. It is always recommended to consult with a qualified financial professional before making any financial decisions based on your individual circumstances.
