Tag Archives: saving for retirement

How much should I be saving?

A word of warning, this is a difficult question to answer simply. Many Kiwis put it into the too hard basket and delay planning for the future. It’s also one of the main reasons that companies no longer offer traditional pensions. For them, it was just too difficult, risky, and expensive to put aside enough for those future liabilities. Any calculation you try to do to figure it out will be filled with uncertainties. How much per year will I need to live on? What rate of return will I earn on my savings? How fast will my income go up during my working years? What will inflation be in the future? How many years will I live in retirement? Will NZ Super stay the same until I am 65?

There are many rules of thumb for what percentage of your earnings you should be saving for retirement. Save 10 % of your take home pay? Save a percentage equal to half your age in the year you begin saving for retirement? Somehow I think that these rules of thumb may oversimplify things. We often start saving slowly and ramp up our savings as we earn more.
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KiwiSaver – Why wouldn’t you?

Every time I read the personal finance columns from Mary Holm and others, I cannot believe that there are still people who are against joining KiwiSaver. Why would you be against free money from the Government? Although not as generous now as it was when first begun, I love getting $521 every year in my account. Plus, your employer will put in some as well. KiwiSaver is the only universal non-employer-sponsored retirement saving vehicle in New Zealand. Employers may have another scheme, but pretty much everyone of working age and younger can join KiwiSaver and benefit.

KiwiSaver is not a tax advantaged scheme like some in other countries. Instead, the government matches your contributions every year up to a maximum (see Member Tax Credit below). Earnings on investments held in the scheme are taxed annually as PIEs or Portfolio Investment Entities. In most cases, these do have a slight tax advantage because the PIE tax rates may be less than marginal income tax rates (This is not an advantage unique to KiwiSaver however).
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