Retirement. It's where we’re all headed, but planning for it is often put on the back burner.
In this three-part series, Newshub chats to everyday Kiwis about how they want to live when they retire: their assets, goals and how much money they think they'll need. We’re focusing on people at three distinct life stages – an ambitious go-getter in the prime of their career, a young couple early in their savings journey, and a busy working Mum.
This month, Connor and Gabi, a mid-20s couple working in retail and construction share how KiwiSaver helped them save a house deposit - and whether they’ll keep it going once they’re homeowners. At the end, a short analysis by KiwiSaver provider Milford looks at whether their KiwiSaver savings are currently on track for retirement.
Hearing other people's stories can be helpful for informing decisions and providing inspiration to move forward. But we also encourage you to think about your own goals - and get financial advice.
KiwiSaver member profile: Connor and Gabi, aged 25 and 26, builder and retail worker.
1. How long did it take you to save a deposit for a first home and how did KiwiSaver help you achieve this?
Gabi: I’ve been in KiwiSaver since I was 16. We used $20,000 from my KiwiSaver and $40,000 from our joint savings towards our first-home deposit (a total of $60,000).
I suppose you could say this was our life savings, taking around nine years to save.
As we purchased the house in partnership with my parents, they helped with a percentage of the mortgage and deposit.
We live in Auckland but couldn’t afford to buy the house we wanted. We bought a four-bedroom house on a decent section in Hamilton, which settles later this month and we’re looking forward to moving in.
2. When did you start saving for your first home and how much did you need to save?
We both knew at some point we’d want to buy a house and as a couple, we had this goal for a long time.
We didn’t have a specific savings goal in mind - we just kept on saving. The market forced our hand.
3. As mortgage borrowers, will you continue contributing to KiwiSaver and why?
We both will. We see it as forced saving and it means we can make the most of the three contributions [our own, the Government's and our employers'].
KiwiSaver is like a safety net. It's there so when we get to the age of retiring or get into financial trouble, we can use it.
If we have grandkids, it means we can help out when we can and not have to fish for pennies.
4. What are your retirement goals and what age would you like to retire?
We’ve never thought about retirement age. But somewhere before 65 (or at 65) would be nice.
What will be really important for us is if we have children and they have children, we have time to be part of their lives.
I wouldn't necessarily say we’ll want to travel at retirement - it's just having the freedom to help out our family.
6. How much money do you think you'll need in retirement, and why?
As we haven't thought much past buying the house, we don’t have a figure in mind.
But for us, buying a house at this age is a big commitment that we want to make now so in 10/20/30 years’ time, we’re in a better position to invest.
We want to start early so hopefully, we have a good amount of money later on.
7. Have you got any other investments outside of your first home and KiwiSaver and how confident do you feel about them?
Not anymore. We had money in a (separate) balanced investment fund, which was where our savings were.
Gabi: I changed to Milford about four years’ ago.
Using Milford’s Mobile App, I’ve seen good returns on my KiwiSaver. I use the app quite frequently to check what’s happening and I can tell when a contribution has gone in or the balance is fluctuating.
It might be at the point now that my fund needs to change to a more aggressive fund.
8. Have you ever sought financial advice and if so, what did you learn? What would you change?
The only conversations we've had were with Milford, when we were looking to invest with them.
We found it was a positive experience: they understood who we were as people. That made us feel a lot more confident that we were in the right funds.
9. What would you say to people struggling to save for a first home? Or those who don’t know where to start?
We totally understand the struggle.
For us, trying to buy a house in Auckland was impossible. When we boiled down what was really important to us, it was that we could buy a home that we were really proud of. We wanted the practical things: four bedrooms and outdoor space for our dog to run around in.
Our top tips for first-home buyers are:
● Tell people what your goals are (family, real estate agents, etc).
● Ask yourself why you’re doing it and what’s most important (be prepared to compromise).
● Use KiwiSaver. Having KiwiSaver was a massive help - it's enforced saving and over time, is more than what we could’ve saved on our own.
● Start early.
When purchasing a house and wanting to use the KiwiSaver first home withdrawal, I’d heard people say it wasn’t that easy to get their money from A to B.
Our law firm's experience with Milford was really positive: things moved quickly. That alleviated a lot of stress.
The Milford team's projection: Are Gabi and Connor's KiwiSaver savings on track?
Congratulations Connor and Gabi on purchasing your first-home. In this day and age purchasing a property before 30 is no mean feat.
We’re seeing more and more members take advantage of their KiwiSaver Investments to help them into their first-homes, and it’s a great way to save for a property by maximising the Government Contribution, and Employer Contributions.
Another benefit of saving for a property using KiwiSaver is the flexibility in reducing the level of investment risk the closer you get to needing the money. This can be done by investing in a Cash and Conservative Fund. This gives members more certainty of their savings than investing in a higher risk fund such as Balanced or Growth.
Given Gabi and Connor's age they’ve got plenty of time on their side to now save towards retirement. As they’ve acknowledged continuing to contribute to their KiwiSaver is very important to get them on track for retirement. As their goal has changed from saving in the short-term for a first-home, to now saving over the next 40 years until retirement it is a great opportunity to review their fund selection, and if needed, seek advice.
When re-assessing your KiwiSaver account, and planning towards retirement it is best to first start with a goal of what you’re trying to achieve. This will likely include what savings and income you’ll need in retirement. Income in retirement could include NZ Superannuation, rental income, investment income and KiwiSaver.
Once you’ve identified your goal, and how much you’ll need from KiwiSaver you’ll then need to determine the mix of contributions, and the fund choice that is needed to help you achieve it. You’ll also need to consider the risk you’re comfortable taking on this investment journey.
Answering these questions can be challenging. At Milford, we offer both In-Person Advice and Digital Advice on Milford’s KiwiSaver Plan, to help ensure you are on track for retirement.
Well done once again Connor and Gabi for purchasing your first-home, and we look forward to continuing our relationship to help you achieve your retirement goals.
Disclaimer: The views expressed by the interview participants are their own and do not necessarily represent the views of Milford. This article is intended to provide general information about things to think about in relation to KiwiSaver. It does not take into account your investment needs or personal circumstances. Before making any financial decisions, you may wish to seek independent financial advice. The disclosure statements of all Milford Financial Advisers contain more information and are available on request free of charge. Read the Milford KiwiSaver Plan Product Disclosure Statement as issued by Milford Funds Limited at milfordasset.com. Please note, past performance is not a reliable indicator of future performance.
This article was created for Milford