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June 13 newsletter

KiwiSaver rolls on.

In April, the Government changed the KiwiSaver rules, which saw both the employer and employee contributions increasing from 2% of income to 3%.

And the $20 Government give away (or member tax credit as some call it) was cut in half to $10 per week back in 2011.

These changes beg the question of whether KiwiSaver is still a good deal or should you give it a miss (you may be able to opt out or take a contribution holiday)?

The simple is yes, it is still a good deal.

There are four major benefits

1) The big monetary benefits. The member tax credit, while now down to $500 per year from $1,000, is still a giveaway. Don’t miss out on your share. The employer will match your 3% contribution. The chance of this contribution impacting future pay rises reduces over time as it just becomes a business expense. Therefore, if you don’t contribute, you will miss out.

2) First Home deposit. It does really defeat the purpose of KiwiSaver allowing you to withdraw your contributions. But research shows that owning your own home is an essential step to achieving some level of comfort in retirement. And let’s not forget the $5,000 housewarming pressie from the tax payers.

3) Investment knowledge. As your KiwiSaver investment grows so will your interest in that investment. Over time, this will broaden and increase your knowledge and comfort levels around investment markets. So once the mortgage is paid off, you will be in a stronger position to make the next steps towards saving and investing for retirement.

4) Forced Savings. Just like owning a house increases your assets through your compulsory mortgage repayments so KiwiSaver will increase your savings through compulsory contributions. Most people raising a family have little money (or energy) left to save for retirement. KiwiSaver automatically adjusts the disposable income and so, without thinking, we are spending less, while simultaneously building a nest egg for the future.

And of course, you can always use the Shape of Money KiwiSaver account calculators to estimate your potential nest egg – KiwiSaver account calculator for employees or KiwiSaver account calculator for the self-employed. Both calculators now let you also enter your current KiwiSaver Account balances.