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Buying a house without KiwiSaver

March 8, 2020

Can't use your KiwiSaver funds to buy a home?


Don't let it hold you back

KiwiSaver is helping more than 35,000 New Zealanders a year into their first homes – but what if it’s not an option for you?

Maybe you’ve just returned from living overseas or can’t yet dip into your Aussie or UK pension funds.

Perhaps you haven’t been in a KiwiSaver scheme for the required three years, or have your sights set on a second home or an investment property.

Whatever your situation, the good news is that KiwiSaver isn’t the only type of investment that can give you a leg up onto the property ladder. Another option is to invest in a managed fund.

Managed funds can be a great way to get serious about saving for big life goals like a house, says Glen Macann, Kiwi Wealth’s Head of Advice.

He says they’re particularly suitable for people who want to buy a house in the medium term – for example, people who are in their first few years in the workforce, or just beginning to think about buying an investment property.

“If your timeframe to buy a house is about five years or more away, you’ll be able to benefit from the potential of higher returns on the amount you’re saving,” he says.

“Managed funds are also a little bit harder to get at than usual savings – for example, you can’t access them with your debit card. That can stop you making any rash spending decisions.”

Here are 3 key advantages of using Kiwi Wealth Managed Funds to achieve your housing goals:

1 Managed funds higher returns than term deposits or savings accounts, although you’ll need to be comfortable with a higher degree of risk.

2 You can invest a large lump sum or start small and build up by making regular contributions through an automatic payment or direct debit. You can open your account with as little as $500. 

3 You’ll have the flexibility to access your funds if your circumstances change – there are no penalties for making a withdrawal. (Just be aware that there is a greater risk to lose some of your investment if you decide to withdraw your money before the minimum suggested investment timeframe.)

While a managed fund is a great option, the choice doesn’t necessarily have to be between KiwiSaver OR a managed fund.

If you’re able to use your KiwiSaver account to buy a house, investing in both KiwiSaver and a managed fund can supercharge your savings.

 Here’s how it works:

  • Investing in KiwiSaver for a first home gives you the advantages of your employer’s contribution and up to $521 free money from the government every year in the form of a Government contribution.
  • Putting any extra money into a managed fund gives you flexibility that you won’t get from your KiwiSaver account. You’ll still be saving for a house, but you’ll be able to access your money early if you need to.

“Managed funds work well by themselves or in conjunction with KiwiSaver. By using the two together, you get the extra benefits of KiwiSaver plus the flexibility of a managed fund,” says Glen.

Tags: Investment Basics, Managed Funds

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