We all know that KiwiSaver is a retirement savings scheme, but what happens to your account when you turn 65?
If you joined KiwiSaver before 1 July 2019 and were aged between 60-64 you would have been locked into KiwiSaver for 5 years and could not withdraw your funds when you turn 65. Instead you can either:
- Opt out any time after you turn 65 (and withdraw your savings)
- Keep your funds in KiwiSaver for the full 5 year term (and withdraw them after that).
- See IRD for more info
This article sets out your options for when you turn 65 and have access to your KiwiSaver money.
I know KiwiSaver is a retirement savings scheme, so what happens once I retire?
There is no retirement age in New Zealand, but 65 is the current age of eligibility for NZ Super, the government pension. 65 is also generally the age you become eligible to access the money in your KiwiSaver account.
Will I be able to take out all my money when I’m eligible to withdraw?
Yes, you will be eligible to take out all the money that is in your KiwiSaver account. That’s all your contributions, your employer contributions, any government kick start and government contributions (member tax credits), plus or minus any returns on your investments.
What’s more, any withdrawals you make from your KiwiSaver account won’t be taxed - because you have already paid tax on your investment returns.
But you don’t have to take your money out. You can leave some or all of your money in your KiwiSaver account.
If you do take out all your money, your KiwiSaver account will be closed, but you will be able to re-join the scheme at any stage.
Why would I leave my money in my KiwiSaver account?
Many providers will let you remain in their Scheme and continue to manage your money for you even if you are eligible to withdraw – so although you won’t receive any government contributions, you can continue to save.
If you leave your KiwiSaver account open, you may be able to make withdrawals and continue to make voluntary contributions. You may also be able to consolidate any other retirement savings into the same account. In this way, your KiwiSaver account becomes a convenient, well-regulated retirement savings management account.
What happens when I become eligible to withdraw and I am still working?
You need to talk to your employer about whether you want to continue contributing through your payroll, or if you want your payroll deductions to stop (you will still be able to make voluntary contributions if you stop your salary deductions).
Once you become eligible to withdraw, your employer is not required by law to continue making contributions, although some may continue to do so.
When you are over 65 (and if you joined before 1 Jul 2019, and have been in KiwiSaver for 5 years), you are no longer entitled to receive the annual government contribution, even if you are still paying PAYE tax through your employer.
If I do leave my money in, what do I need to think about?
It‘s a good idea to check that you are in the right type of fund for your needs.
For example, if you plan to use your KiwiSaver money for regular income, a Cash fund (one with a high proportion of cash and fixed interest investments) has less risk than one with a lot of shares which may go up and down in value more often. You can check which fund best suits your needs in myKiwiWealth.
How can KiwiSaver help me in retirement?
New Zealand Super is around $437 for singles and around $672 for couples weekly after tax. So, many people appreciate a little bit extra to top that up, or to have some for a rainy day.
If you had $20,000 in your KiwiSaver account and you became eligible to withdraw, you could take it all out and buy a new car or fix your roof. But if you left your money in KiwiSaver, your account could keep making money for you.
[These are estimates only, actual returns may vary]
Let’s say you were 65, and had a balance of $20,000. If you left your money in your KiwiSaver account, and it earned a real rate of return of 2% a year, you could withdraw $40 a fortnight for around 19 years.
And of course if you continue to add to your voluntary contributions, it can keep on growing through your retirement years.
Check with your KiwiSaver provider about the specific options they offer to members aged 65+.