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25 March 2013

KiwiSaver Checkup

Filed under: KiwiSaver - Tags: , - @ 2:58 am

KiwiSaver Checkup

Around two million Kiwis now have just over $14billion invested in KiwiSaver. No doubt much of that amount is money that would otherwise have been spent. As their fund balances increase, many KiwiSavers are learning that small amounts of saving made on a regular basis over a long time soon build up into a tidy sum. On 1 April, there will be another opportunity to learn, as the minimum KiwiSaver contribution for both employees and employers is increased from 2% to 3%. That means those who are on the minimum contribution will have their take-home pay reduced by 1% of their gross pay. For example, if you earn $50,000 a year, your KiwiSaver deductions will increase from $1,000 a year to $1,500 a year; an increase of around $28.85 a week.

It will be timely to have another look at your budget to see what effect this increase will have. If it is simply not affordable at this time and you have been in KiwiSaver for at least 12 months, you can apply for a contributions holiday of up to 5 years. There is no limit to the number of times you can apply for a contributions holiday and you can renew it at any time. Stopping your contributions should be a last resort option, because you will miss out on your employer contributions and your annual tax credit.

While you are reviewing your KiwiSaver, check that your annual contributions are as close as possible to the optimum amount of $1,040 per annum so that you are neither missing out on part of your tax credit nor locking away more than you need to until retirement. Check too, that the fund you are invested in has an appropriate balance of risk and return for your particular financial circumstances and goals.

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13 June 2011

Top Up Your Retirement Savings

Filed under: KiwiSaver, Retirement - Tags: , - @ 7:33 am

Top Up Your Retirement Savings

Now is a good time to be thinking about whether you are putting enough aside for your retirement. A review of your long term plans should be done on an annual basis and June is a good month for two reasons; firstly because it is too wet and cold outside to be doing anything more interesting and secondly because you should make sure you have put enough into your KiwiSaver fund to get the maximum Government tax credit. If you are self employed, working part time, or a low income earner, you might find your contributions for the year are less than $1,040. This means you will not receive the maximum tax credit of $1,040 as it is a matched credit. You can check what your contributions have been with your KiwiSaver provider and if there is a shortfall it is simply a matter of making a lump sum deposit into your fund. Your KiwiSaver provider will tell you how best to do this and it needs to be done well before 30 June to allow time for processing. If you have joined KiwiSaver part way through the year or turned 18 during the year, you are only eligible for part of the tax credit.

Retirement savings are not just about KiwiSaver, however. Depending on your goals, you may need to supplement your savings with other investments. There is a great retirement calculator at www.sorted.org.nz which will give you guidance on how much you should be saving. You will need to think about the age at which you would like to have the choice of not working, and how much income you will need over and above NZ Superannuation to pay for extras such as home maintenance, replacing your car, travel and other things you may wish to do in retirement.

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23 May 2011

Advice for KiwiSavers

Filed under: KiwiSaver - Tags: , - @ 7:25 am

Advice for KiwiSavers

KiwiSaver skeptics will no doubt be saying ‘I told you so’ after the recent changes announced in the budget. A minority of the population have refused to join KiwiSaver on the grounds that the Government will keep changing the rules or mismanage their money. Yes, the rules have changed, but joining KiwiSaver is still a great idea and the skeptics are missing out on an opportunity to increase their wealth.

 Under the current rules, KiwiSavers are required to contribute a minimum of 2% of their gross pay and this is matched by an employer contribution of 2% from which no tax is deducted. There is a $1,000 ‘kickstart’ payment from the Government as well as a matched tax credit of up to $1,040 per annum, paid each July. The new rules leave the $1,000 kickstart unchanged. From 1 April next year, the employer contribution will have tax deducted, so less will be paid into your KiwiSaver fund. From 1 July this year, the Government tax credit will be cut in half to around $520 per annum (paid in July 2012) and from 1 April, 2013 the minimum employee and employer contributions will be 3% of gross pay. Whereas previously the average wage earner’s contribution was tripled with the employer and Government contributions, now it will be roughly doubled, but that is still a good deal! If you haven’t joined already, joining sooner rather than later will let you take advantage of the old rules before they change. Self employed KiwiSavers Self employed KiwiSavers will still have to contribute $1,040 per annum to get the maximum tax credit of $520 as the credit will be paid at the rate of 50c per $1 contributed. Existing KiwiSaver members should ensure that their chosen fund is appropriate for their needs by obtaining advice from an Authorised Financial Adviser.

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31 May 2010

Top Up or Miss Out

Filed under: KiwiSaver - Tags: , , - @ 3:13 am

The end of June is an important date for KiwiSaver members. The financial year for KiwiSaver runs from 1 July 2009 to 30 June 2010 and if you have contributed at least $1,040 to KiwiSaver during that time, you will be eligible for the full amount of Government tax credit to be paid into your KiwiSaver account in July. The maximum value of the tax credit is the lesser of $1,040 or the total of your contributions for the year. If you have put in $900 through deductions from your pay, then your tax credit will only be $900. By putting an extra $140 into your account before the end of June you will get the full tax credit of $1,040.
If you are contributing 2% of your pay into KiwiSaver and you earn less than $52,000 a year, or if you are contributing 4% of your pay and you are earning less than $26,000 a year, you will need to top up your KiwiSaver account to get the full tax credit. To find out how much you need to top up your account by, check your contributions with either your product provider or your financial adviser.

If you are self employed or not working and under the age of 65, you can still become a KiwiSaver member by joining directly with the provider of your choice. By contributing $1,040 a year as a either a single payment or $84 a month you will get the full benefit of the tax credit. It is not too late to join now. New members will receive the Government kickstart payment of $1,000 and a tax credit for the first year based on the number of days of membership.

Get your payments in as soon as possible to allow time for processing!

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