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Top up with a few extra dollars a week to ensure you're in the right savings fund for your retirement.

Four easy tips to boost your retirement savings

 

Between making mortgage repayments, paying monthly bills or trying to put away enough for a small break with the family, if you're decades away from retirement, thinking about the income and lifestyle of your 65+ future self is probably far from your mind.

However, the earlier you start saving for retirement, the better off your future-self will be; and the best thing is, saving for retirement is much easier than you think!

Speaking to Resimac, Claire Matthews, KiwiSaver expert at Massey University, says when it comes to setting yourself up for a comfortable retirement, making small contributions part of your everyday routine is key to building good returns on your savings.

"Kiwis should prioritise retirement savings now simply because it's never too soon to start saving. The long-term benefit is the impact of compounding returns – the sooner you start saving, the smaller the regular contribution will be required to achieve the same end goal," she says.

From topping up with a few extra dollars a week to making sure you're in the right savings fund, we've compiled four easy tips to help you save for your retirement.

1) Don't miss out on the $521 annual government KiwiSaver contribution

 

They say the best things in life are free, so don't be one of the thousands of Kiwis that miss out on their free annual government KiwiSaver contribution. For every dollar you save into your KiwiSaver account, the Government will contribute 50 cents, up to a maximum of $521.43 each financial year. If you claim the maximum amount every year from the age of 18, you can add $24,500 or more to your retirement!

To receive the maximum Government contribution, you need to contribute $1,042.86 from 1 July to 30 June.

If you think you might miss the $1000 contribution mark by June 30, put a reminder in your calendar at the start of each year to do a KiwiSaver 'check-up' and see how you're tracking.

If your funds are low, break down the contribution into smaller weekly or monthly deposits to get the maximum contribution. Setting up an automatic transfer will help to ensure you get the maximum government contribution.

2) Find the best way to make voluntary contributions to your KiwiSaver account

 

Another way to work towards your retirement savings goal is to deposit any bonus or lump sums you receive into your KiwiSaver account. Anyone can do this regardless of the level of KiwiSaver contribution they make or whether they are in paid employment or not.

All you need to do is log into your online banking for your transaction account, choose the 'pay tax' option, have your IRD number ready and choose 'KSS' as the tax type.

According to Matthews, size doesn't matter when it comes to topping up your retirement savings.

"The bigger the amount you contribute, the larger your funds for retirement will be. However, a small contribution is better than no contribution, and a smaller fund at retirement will still provide support in excess of NZ Super," she explains.

3) Increase your KiwiSaver employee contributions

 

Now could be the best years of your life to invest in your retirement savings. While the economy is in a downturn and interest rates are low, why not increase your employee contributions towards your KiwiSaver?

"While the share market will go through some volatile times, in the long term it can be expected to rise and you can't benefit from that unless you're in the game, However, if someone is having a difficult financial period due to COVID-19, this is probably not the right time to be looking to increase contributions. The focus should be on maintaining current contributions if possible," Claire continues.

Most employed KiwiSaver members contribute the minimum rate of three per cent of before-tax salary, however, you can choose to increase to four per cent, six per cent, eight per cent or 10 per cent and reduce it back to the minimum at any time.

3) Increase your KiwiSaver employee contributions

 

Now could be the best years of your life to invest in your retirement savings. While the economy is in a downturn and interest rates are low, why not increase your employee contributions towards your KiwiSaver?

"While the share market will go through some volatile times, in the long term it can be expected to rise and you can't benefit from that unless you're in the game, However, if someone is having a difficult financial period due to COVID-19, this is probably not the right time to be looking to increase contributions. The focus should be on maintaining current contributions if possible," Claire continues.

Most employed KiwiSaver members contribute the minimum rate of three per cent of before-tax salary, however, you can choose to increase to four per cent, six per cent, eight per cent or 10 per cent and reduce it back to the minimum at any time.

4) Make sure you're in the right fund for your stage in life

 

Being in the right fund is just as important to the growth of your KiwiSaver account as making regular contributions. You need to choose a fund that suits both your attitude to risk and your investment timeframe.

According to Matthews, "Many KiwiSaver members don't make the most of their account as they are in the wrong fund for their situation. Often this happens because they have failed to actively choose their provider/fund and remain in the default conservative fund allocated by the IRD."

To make sure you're in the right fund, Claire recommends seeking advice from a financial advisor about your current finances, retirement savings goal and then creating a roadmap of how you're going to get there.

Alternatively, make use of tools such as fund finder that allow you to see how much you may be able to save by the time you're 65 if you invest in a growth fund versus a conservative fund.

 

The opinions expressed in this article are the opinions of the author(s) and not necessarily those of Resimac. The above is general commentary only and is not advice tailored to any individual's financial situation. We recommend seeking advice from an insurance or finance professional before implementing changes relating to your finances.