KiwiSaver – it’s not just for employees. If you’re self-employed, there are still many ways that you can benefit from this powerful investment tool.
In this helpful guide, our SHARE advisers have put together some key things to know about KiwiSaver for the self-employed.
How to join and contribute
Unlike employees, who are mostly automatically enrolled when they start a new job, if you’re self-employed you can join KiwiSaver by contacting the scheme provider of your choice directly.
You can pay your KiwiSaver contribution through the provider or through IRD, and you can change your contribution amount at any time. The key thing to know is that contributions are not automatic, so if you don’t want to forget, it may be a good idea to set up an automatic payment.
Key benefits of KiwiSaver for you
While you obviously won’t receive the employer contributions, there are still some very good reasons to join the retirement savings scheme. Here are a couple of them, to start with:
- First of all, you’ll have access to the annual Government contribution, just like any other KiwiSaver contributing member aged 18 to 64. In short, every year, the Government adds a little extra to KiwiSaver accounts – namely 50 cents for every dollar you contribute between 1 July and the following 30 June, up to a maximum of $521.43.
For example, if you contribute $400, the Government will add an extra $200; if you put in $450, you’ll get $225 and so on. But if your budget allows it, it makes sense to maximise your bonus by contributing at least $1,042.86 during the KiwiSaver year.
Again, it can be easier to stay on track if you set up an automatic payment. But if you prefer to rely on voluntary contributions, then we recommend checking how much you’ve contributed by early June: this should give you enough time to top up your account if need be.
- Planning to purchase your first home? KiwiSaver could help you with that too. After being a member for three years, you may be able to withdraw most of your KiwiSaver funds to help with the deposit.
Plus, if you’ve been making regular contributions to your account, you might also be entitled to receive a First Home grant of up to $5,000 for an existing home, or up to $10,000 for a new build. Keep in mind that there are strict eligibility criteria to meet, including location-specific house price caps and income requirements.
Choosing your KiwiSaver scheme and fund
As an investment tool, KiwiSaver is as straightforward as it is versatile. There are a lot of schemes and funds to choose from, so it’s important to select a KiwiSaver fund that aligns with your risk profile.
So, what’s your risk profile? Essentially, it’s determined by two factors: how you feel about market volatility, and how much risk you can comfortably take based on your investment horizon. In other words, it depends on your emotional response to money losses and gains, but also on how much time you have until you need to withdraw your KiwiSaver money – either to purchase your first home or to use in retirement after age 65.
The longer your investment horizon is, the more risk you may be comfortable to take. However, this is just a rule of thumb. Once again, how you feel about market movements also matter. So, for a more personalised assessment, please get in touch with a SHARE adviser: we can help you understand where you are on the risk profile spectrum.
The benefit of annual reviews
There’s another good reason to work with a SHARE adviser, and that’s regular KiwiSaver reviews.
With KiwiSaver being a long-term investment tool, checking your account too often may actually be detrimental to your strategy, as short-term movements might prompt impulsive decisions. So, as long as you choose a KiwiSaver fund that’s aligned with who you are as an investor, you may want to focus on the long term and let the scheme tick along in the background.
Having said that, annual reviews can help you ensure that everything is going to plan, and make changes if need be. For example, as a self-employed person, early June can be a good time to check in on your KiwiSaver – just in time for maximising your annual Government contribution.
Whatever frequency you choose, get in touch: our SHARE advisers can discuss your changing needs with you, and recommend an appropriate course of action.
Like to learn more?
As always, our SHARE financial advisers are just a phone call away. We can talk through your options and help you understand your risk profile, as well as what strategy may be most effective. Click here to find an adviser near you.
Disclaimer: Please note that the content provided in this article 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 situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.