Your KiwiSaver investment is intended to give you a better retirement – but what if you need the funds now? Can you withdraw your savings early? And what impact could that have on your future?
When you’re finding it hard to make ends meet, it’s tempting to think about tapping into your retirement savings.
That’s especially true when you’re feeling the financial hangover from Christmas. By January, when the credit card bill arrives and you may be facing hefty back-to-school costs, dipping into your savings can seem like the only way to stay afloat.
So, can you withdraw your KiwiSaver money early?
The main purpose of KiwiSaver is as a long-term retirement savings scheme that’s locked in till you’re eligible for NZ Super, which is currently set at 65.
But if you can provide evidence that you're suffering significant financial hardship, you may be able to withdraw some of your KiwiSaver money early.
Here’s a quick guide to what you’d need to do to access your KiwiSaver investment before you hit 65 – and why it’s a really good idea to consider other options first.
Am I allowed to get my money out?
You’ll have to be able to show you’re in significant financial hardship, which includes:
- being unable to meet minimum living expenses
- being unable to meet mortgage repayments on the home you live in, resulting in your mortgage provider enforcing the mortgage on your property
- modifying your home to meet your special needs, or those of a dependent family member with a disability
- paying for medical treatment if you or a dependent family member becomes ill, has an injury or needs palliative care
- suffering from a serious illness
- having to pay funeral costs for a dependent family member.
How can I start the process?
If you belong to the Kiwi Wealth KiwiSaver Scheme, contact us for the application forms to get the process started.
You’ll need to complete a statutory declaration about your assets and liabilities, provide documents to support your application, and show you’ve looked at other ways to find the money you need.
How much can I withdraw?
It’s up to the Supervisor of your scheme to decide whether you meet the hardship criteria and how much you can withdraw.
You may be able to withdraw anything up to the total current value of the amount that you and your employer have contributed, but you can’t withdraw the $1,000 kick-start, if you received it, or any member tax credits.
Do many people withdraw from their KiwiSaver account early?
Nearly 14,000 people in serious financial hardship withdrew an average of $5,786 each from their KiwiSaver accounts in the year to 31 March 2017, according to the Financial Markets Authority’s annual KiwiSaver report.
More claims tend to be made around Christmas and in January or February. Claims are often linked to life-changing events like a job loss, ill health or a partner’s death.
Is accessing my KiwiSaver account a good idea?
Raiding your KiwiSaver account now may help you in the short-term, but in the long-term it may mean you face a tougher retirement and have to work for longer.
So it's smart to take a close look at your finances and consider all the alternatives before applying to take your money out of your KiwiSaver account.
What are the alternatives?
Other options to consider include:
- Rather than continuing to put money into your KiwiSaver account while your debts pile up, take a break from saving with a contributions holiday.
- Explore ways to tackle debt, such as negotiating a new repayment plan with your creditors.
- Seek free advice from financial capability (budgeting) services. Visit the Family Services Directory to find out what’s available in your area.
Some budgeting services offer useful online advice to help you manage your money at this time of year. For example, Whānau Matters, part of the Ngāi Tahu Financial Independence Programme, has tips on getting out of debt and avoiding debt at Christmas.
Whatever you decide, remember that keeping your money in your KiwiSaver account won’t help you avoid hardship today, but could go a long way towards preventing hardship in retirement.
So while tapping into your KiwiSaver account early may seem like the only option, don’t forget that you need to plan for the future, as well as the present.
The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed, or relied on, as a recommendation to invest in a particular financial product or class of financial products. You should seek financial advice specific to your circumstances from an Authorised Financial Adviser before making any investment decisions.