If you’ve recently checked your KiwiSaver balance, you may have noticed a drop in your balance. As you know, the share markets are experiencing heightened volatility, affecting performance across all KiwiSaver funds. So, what does this mean for you? And what steps can you take now?
Once again, our SHARE advisers are here to help you make informed decisions about your retirement savings. Here are some key things to know.
You’re in KiwiSaver for the long haul
Generally speaking, KiwiSaver is a long-term savings scheme, designed to help New Zealanders achieve their retirement goals. Keep in mind that, while your KiwiSaver balance will go up and down, history shows us that the returns on managed funds generally will help the balance grow in the long run, despite a short-term drop.
If your retirement is still more than five years away, your fund is likely to bounce back and recover, so sticking to your plans – provided your attitude to risk and goals haven’t changed – may be the most appropriate thing to do.
Talking to a SHARE adviser can help you understand your options: we can run the numbers for you and talk you through your options, to help you stay on course. Plus, market downturns often create opportunities for fund managers to reshape their portfolios: it may be worth giving them time to ride out the turbulence, otherwise any reduction in balance will be realised.
What if you were planning to access your KiwiSaver funds before retirement?
While KiwiSaver is designed with retirement savings in mind, each year many New Zealanders also access it to buy their first home. If you were planning to use your KiwiSaver funds to step on the property ladder, it’s important to make sure that your KiwiSaver is set-up appropriately for this goal.
Your investment horizon – how soon you need to access your KiwiSaver money – is one of the main factors to consider when choosing a fund. As a general rule of thumb, the longer you have, the more risk you may be able to take, so a higher-risk fund could be appropriate for your needs. On the other hand, if you need to withdraw your KiwiSaver funds sooner rather than later, investing in a lower-risk fund is usually more appropriate.
Of course, the decision entirely depends on your circumstances, and once again, talking to a SHARE adviser can help you understand your options in more detail. Please don’t hesitate to contact us.
What about financial hardship withdrawals?
Under strict circumstances, KiwiSaver members can withdraw part of their funds to get through difficult financial patches – click here to learn more.
While this option can certainly provide much-needed support in times of need, there are crucial things to consider, like the negative impact on your long-term retirement goals. As both the Financial Market Authority and Retirement Commissioner Jane Wrightson have recently pointed out, it’s important to use financial hardship withdrawals as a ‘last resort’. If your finances have been affected by Covid-19, the NZ Government, insurance providers and lenders have been putting in place extraordinary measures to support New Zealanders’ financial wellbeing, including but not limited to:
- Mortgage repayment deferrals;
- Insurance premium ‘holidays’;
- Wage subsidy scheme;
- Leave and self-isolation support;
- Business finance support schemes;
- Business cash flow and tax measures;
- Support for Maori communities and businesses;
- Other financial help from Work and Income.
- A free government helpline: 0800 779 997 (8am–1am, 7 days a week).
We strongly recommend a visit to covid19.govt.nz for up-to-date information on the support packages you may be eligible for. And of course, please get in contact with a SHARE adviser if you need assistance with your mortgage, insurance or KiwiSaver.
Don’t let your emotions get in the way
Feeling stressed or anxious about your KiwiSaver performance is normal, but just like with any other investments, rash decisions can lead to poor outcomes. With so many factors to take into account, timing the market is extremely difficult. Plus, if you switch funds for a more conservative option now that markets are low, you may crystallise a loss instead of giving your KiwiSaver an opportunity to recover.
If you’re thinking of changing your investment strategy, please give us a call. We can help you review your KiwiSaver set-up, assess any changes to your attitude to risk, and check whether the fund you’re invested in is still appropriate for your goals.
Like to discuss this further?
Please get in contact with us at your earliest convenience. In times of uncertainty, working with an experienced adviser is all about having a plan and taking that next step with confidence.
Disclaimer: Please note that the content provided in these articles is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your specific situation. Before making any decisions based on the information provided in these articles, please use your discretion and seek independent advice from your SHARE Financial Adviser.