How to manage your KiwiSaver for tough economic times, recession

  • 24/03/2023
  • Sponsored by - Milford
How to manage your KiwiSaver for tough economic times, recession
Photo credit: Getty Images

Anyone reading the news knows it's been a tumultuous time for share markets lately. Economic confidence has taken a hit and talks of a looming recession has had a significant effect on markets around the world lately, something that has understandably left many New Zealanders feeling anxious about their KiwiSaver savings. 

Despite the ongoing volatility, though, there are a number of steps you can take to manage your savings, and, depending on your investment horizon, possibly even come out ahead.

"It's only natural to be nervous when you see volatility - whether that's a headline saying the share market has fallen or actually logging into your own account and seeing your balance going backwards," says Eachann Bruce, a financial adviser at award-winning KiwiSaver manager Milford.

"But one thing that I do try and speak with clients about when they're reading the headlines is just to look at the long term."

The most important thing to remember in times of economic instability, according to Bruce, is to avoid overreacting and making rash decisions that will hurt you down the track.

"The number one mistake is to panic," he says.

"Panic can come in a number of different forms - it may be moving from a higher-risk fund to a lower-risk one or it might actually be to reduce your contributions."

Although past results can never guarantee future performance, historically the share market has always recovered after falling, it's just a question of how long that recovery takes. In some cases, it may be a question of weeks or months, while sometimes it could take years to rebound.

The key, says Bruce, is to play the long game. 

For people in their 20s or 30s, who have decades left until they retire, time is on their side. In fact, a drop in the market may actually offer a chance to get more bang for your buck, with every dollar invested generally allowing you to buy units in your KiwiSaver fund at lower prices. 

For those who are planning on withdrawing their savings sooner rather than later - either to buy a first home or for retirement - the approach is a little different. In this case, says Bruce, it's probably important to have your money in a conservative or cash fund, which is far less volatile and has less - or in the case of the cash fund, no - exposure to the share market. 

"The key point about investing and choosing your funds is it's not one-size-fits-all," he says.

"Just because your friend's in a growth fund doesn't necessarily mean that fund's right for you. You need to be making your own choices and if you're not sure, have a conversation with somebody who has experience in this area, like a financial adviser."

The best way to come out on top when it comes to saving, says Bruce, is to get things right from the start.

"Making a decision early on in your KiwiSaver journey will pay dividends in the long run and will leave you in a far better position at retirement." For those taking a long-term view to investing, Bruce says the surest way to success is to make regular contributions no matter what the market is doing, an approach called dollar cost averaging.

"Buying small amounts of the share market over a long period of time has been shown to be better than putting lump sums into your KiwiSaver once, say, every five years," he says. 

In the case of Milford's KiwiSaver Funds, Bruce says growth and aggressive funds are suited to people who have a higher tolerance to risk and who won't be withdrawing their money in the next seven to ten years, respectively, while balanced funds tend to be for people who may want a lower level of risk, or don't need to access their savings in at least five years.

For those who will want to use their money after three or more years a conservative fund could be considered and a cash fund is often the best fit for anyone who may need their money in the next six to 12 months.

Bruce encourages anyone who is confused or anxious about their savings to get in touch either with their KiwiSaver provider or an independent financial adviser. 

"I can't stress it enough," he says. "If you're not sure, ask - there are no dumb questions. Everybody in the industry wants to get KiwiSaver members into the right funds to help achieve their goals."

Disclaimer: This article is intended to provide you with general information only. It does not take into account your objectives, financial situation or needs. Milford Funds Limited is the issuer of the Milford KiwiSaver Plan. Please read the Milford KiwiSaver Plan Product Disclosure Statement at Before investing you may wish to seek financial advice. For more information about Milford’s financial advice services visit Financial Advice Disclosure Statements for all Milford Financial Advisers are available on request free of charge. Past performance is not a reliable indicator of future performance.

Article created in partnership with Milford.