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Most New Zealanders get within 10 to 20 years of retirement and realise they have not saved enough to give them a better lifestyle than just NZ Super will provide. Without saving for ourselves, we become solely reliant on New Zealand Super and for most people, that is not enough!

When it comes to saving for retirement, the earlier you start the better off you are and now KiwiSaver makes it a whole lot easier than it used to be. Why? The combination of government tax credits, employer contributions and the impact of compound interest on your savings, means you don't have to save as much as you had to, before KiwiSaver arrived.

The issue to join or not to join KiwiSaver, is one of “when and how” rather than “if”.

To understand the value of KiwiSaver an example helps.

If an employee who earns $40,000 a year ($769.23 a week), joined KiwiSaver on 1 July 2016 and invests in an investment option that produces a return after-tax of 2.5% per annum, the accumulated value in today's money, works as follows:

Year     Personal savings (3%) Employer savings Government payments Admin fees    Real return Total savings
Kick-start Tax credits
  $ $ $ $ $ $ $
1 1,200
990 1,000 521
-33 46
3,724
2 1,200 990   521 -33 120 6,522
3 1,200 990   521 -33 190 9,390
4 1,200 990   521 -33 262 12,330
5 1,200 990   521 -33 333 15,343
etc.              

Note: 2.5% was chosen to reflect tax and inflation and therefore the numbers can be considered to be in “today’s dollars".

 

At age 65, in today's dollars, the accumulated value is:

Age when joined Accumulated value at age 65 in today's dollars Total
Personal savings Employer savings Government payments* Investment returns
60 6,000 4,950 3,605 788 15,343
55 12,000 9,900 6,210 3,468 31,578
50 18,000 14,850 8,815 8,280 49,945
40 30,000 24,750 14,025 25,465 94,240
30 42,000 34,650 19,235 55,053 150,938
20 54,000 44,550 24,445 100,523 223,518

*Less admin fees

When added to the benefits of NZ Super, KiwiSaver gives New Zealanders the opportunity to accumulate the additional wealth required to enjoy a super life in retirement.

After tax NZ Super rates for From 1 April 2016
Married couple $30,781 p.a.
Single living alone $20,008 p.a.
Single (sharing) $18,468 p.a.

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Examples of employees who earn $26,000 and $60,000 are:

If the employee earns $26,000

Year  Personal savings (3%)  Employer savings  Government payments Admin fees  Real return  Total savings 
Kick-start Tax credits
  $ $ $ $ $ $ $
1 780 644 1,000 390 -33 36 2,817
2 780 644   390 -33 88 4,686
3 780 644   390 -33 135 6,602
4 780 644   390 -33 182 8,565
5 780 644   390 -33 232 10,578

etc.

           

 

Age when joined Accumulated value at age 65 in today's dollars Total
Personal savings Employer savings Government payments* Investment returns
60 3,900 3,220 2,950 508 10,578
55 7,800 6,440 3,900 2,280 21,420
50 11,700 9,660 5,850 5,477 32,249
40 19,500 16,100 9,750 16,922 63,272
30 27,300 22,540 13,650 36,650 101,140
20 35,100 28,980 17,550 66,986 149,616

*Less admin fees

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 If the employee earns $60,000

Year  Personal savings (3%)  Employer savings  Government payments Admin fees  Investment return  Total savings 
Kick-start Tax credits
  $ $ $ $ $ $ $
1 1,800 1,485 1,000 521 -33 59 4,832
2 1,800 1,485   521 -33 161 8,766
3 1,800 1,485   521 -33 260 12,799
4 1,800 1,485   521 -33 361 16,933
5 1,800 1,485   521 -33 464 21,170

etc.

           

 

Age when joined Accumulated value at age 65 in today's dollars Total
Personal savings Employer savings Government payments* Investment returns
60 9,000 7,425 3,605 1,140 21,170
55 18,000 14,850 5,210 4,938 43,998
50 27,000 22,275 7,815 11,735 69,825
40 45,000 37,125 13,025 35,957 132,107
30 63,000 51,975 18,235 77,624 211,834
20 81,000 66,825 23,445 141,622 313,892

 *Less admin fees

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