World Commission on Environment and Development
Should all your savings be in KiwiSaver?
Lyfords recommends KiwiSaver but only up to the amount that you get your full employer subsidy.
If you contribute the minimum of 3%, your employer is required to also contribute 3%.
Why do we not recommend contributing more?
Your funds are locked into age 65 and you loose flexibility with your savings.
The exception would be if you were contributing for your first home.
Benefits of KiwiSaver
You are saving a little for your retirement. The deductions come straight from your pay so you quickly adjust to a slightly lower income and you are saving painlessly. It is not nearly enough though. Many people believe that if they are contributing into KiwiSaver they will manage financially in their retirement. If they talked with an investment adviser they would realise they need to save a lot more than they currently are.
Disadvantages of KiwiSaver
If an investment opportunity arises you cannot access your Kiwisaver funds and you could miss out. Likewise, if there is a financial catastrophe in your family you cannot access funds to help a loved one.
The rules on withdrawal for KiwiSaver are to protect savers from themselves. Too many people raid their superannuation savings to take holidays or upgrade their homes. The rules prevent you from accessing your funds when you need to. While you may be able to withdraw your funds for reasons of severe financial hardship you have to convince the trustee of your scheme that this is the case. There is no certainty that your funds would be released.
How much should you be saving for retirement?
We have several financial calculators that may help: