KiwiSaver is boring. That’s a feature, not a flaw.

Sonnie Bailey

27 December 2019

Indra’s net

Indra is a deity in several religions, including Hinduism and Buddhism. He’s sometimes known as “God of the Gods”.

Befitting a God, he has a magnificent palace. Over Indra’s palace is a net, made of many jewels.

On every jewel of Indra’s net, you can see the reflection of every other jewel. On every jewel you can see the reflection of every other jewel.

Indra’s net is a metaphor: every piece of the whole reveals the whole, and vice versa.

Trust me, this article relates to KiwiSaver.

Orphan X

In Gregg Hurwitz’s Orphan X novels, Evan Smoak’s second commandment is “How you do anything is how you do everything”.

Trust me, this relates to KiwiSaver.

KiwiSaver is boring

I rarely write about KiwiSaver on this blog.

To be honest: I find it boring.

I also find that when I provide advice to clients, KiwiSaver is usually an incidental part of my advice. It’s a small part of a much bigger puzzle.

To be clear: for many people KiwiSaver is important. But it shouldn’t be the entirety of your retirement plan. And to a large extent, it’s designed to be simple and set and forget.

The fact KiwiSaver is boring is a feature, not a flaw.

KiwiSaver is simple but it’s part of something more complex

Every now and then I have clients ask for specific advice about KiwiSaver.

I explain that it’s not as simple as it might seem.

It’s not enough to just ask about their balance and what they want out of KiwiSaver alone.

To provide advice I need to get an understanding of their broader circumstances, needs, and objectives.

KiwiSaver is part of a much bigger whole.

Whether to invest in a conservative, or balanced, growth fund, or somewhere in between, depends on many different factors, such as:

  • The value of your non-KiwiSaver assets and how they are invested.
  • Your expected income prospects and anticipated cash flow needs.
  • Your personal tolerance for risk.
  • Your expectations regarding whether and when you’ll need to access those funds.
  • Your broader family situation.
  • And more.

One small decision impacts everything and is impacted by everything.

It’s a crystal on Indra’s net.

It’s only one thing, but it reflects how you do everything.

KiwiSaver: starting points

Below are my starting points when it comes to KiwiSaver.

This is general advice. It’s not definitive. Because… well… if you’ve read this far, it should be obvious.

  • If your employer co-contributes to KiwiSaver, make sure you contribute enough to maximise these co-contributions.
  • Make sure you contribute enough to maximise Government Contributions (currently $521 for $1,043 contributed in a given July-to-June twelve-month period).
  • Pick an investment option that aligns with when you need to access the funds. For instance: if you expect to use funds to buy a home in the next year or so, invest conservatively. If you aren’t going to touch the funds for years or decades, invest aggressively – in a growth or high growth fund.
  • Make sure your PIR rate is correct so you’re not paying unnecessary tax.
  • The provider you use is arguably the least important part of the equation. But for reference, I tend to recommend Simplicity’s Conservative, Balanced, and Growth KiwiSaver funds to clients. Sometimes I recommend SuperLife’s High Growth KiwiSaver fund.

These are starting points and I regularly depart from them based on my clients’ broader circumstances.

(And if you’re interested, as I write this article I personally use Simplicity’s Growth KiwiSaver fund. Some days I think I should switch to SuperLife’s High Growth Fund, but even advisers can be indecisive and/or lazy.)

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