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Want to retire early? Have a plan

June 22, 2020

Following these four steps could help you turn your dream of early retirement into reality.

pen and calculator planning

Has COVID-19 brought forward your retirement plans?

Lockdown has been a chance to discover what life could be like away from our usual routines. We’ve been forced to re-evaluate what’s important to us, and to think deeply about what we want in life.

While it’s uncertain how long it will take for life to return to normal, the best advice for people considering retiring early is the same as it has always been – start planning now.

A comfortable early retirement could be within your reach if you take the right steps to make it happen.

Step 1: Work out how much you’ll need

Having the freedom to retire early involves earning, saving and investing as much as you can.

You’ll need to identify how much money you’ll need in retirement, and then make smart investments to help you achieve your goal.

In most cases, you won’t be able to access NZ Super or your KiwiSaver investment till you turn 65, so you’ll need another income stream if you plan to quit the workforce early.

Step 2: Decide how to invest

Term deposits have traditionally been seen as ‘safe’ places to grow wealth. They’ve been popular with savers who want to lock away their money and earn fixed returns.

But term deposits have hit historically low levels.

You might decide you’d be willing to take more risk in the hope of higher return. You might also want more choice about how much you can withdraw, and when.

If flexibility, accessibility and the potential to gain higher returns are important to you, you could opt for a managed fund.

A managed fund pools investors’ money in different types of assets, such as shares, cash, bonds and property.

Over the long term, a managed fund has the potential to give you better returns than a savings account or term deposit. And many managed funds including Kiwi Wealth Managed Funds allow you to access your money when you need it, without penalties.

The key is to find a managed fund that suits your early retirement timeframes and your attitude to risk.

Step 3: Get strategic

There’s no need to choose between a managed fund and KiwiSaver – they work well together.

You could keep contributing to your KiwiSaver investment, to benefit from your employer contribution and the government’s annual $521 Member Tax Credit. Then you could put any spare money into a managed fund.

If you retire early, a managed fund could keep you going till you can access your KiwiSaver funds and start receiving NZ Super at 65.

Another option is to go part-time from, for example, 55 or 60, and draw on your managed fund whenever you need to.

Step 4: Keep up the pace

Many of us discovered in lockdown how much of our spending is discretionary, and how much we can save when we’ve broken our spending habits.

If you didn’t end lockdown with an unexpected nest egg, you can open a Kiwi Wealth Managed Fund with just $100 and make contributions of as little as $1.

As with KiwiSaver, regular contributions are a great way to invest and potentially retire early. Even if you don’t have much to put aside, investing little and often will give your savings time to grow.


Tags: KiwiSaver, Retirement, Kiwi Wealth, Managed Funds

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