3-Step KiwiSaver health check
By Fisher Funds
11 July, 2018
You will have received your KiwiSaver annual statement recently, and with a whole year's worth of activity at your fingertips it's a great opportunity to check your KiwiSaver account. Take a few minutes to make sure you're maximising your savings potential wherever possible.
We recommend zeroing in on the following three points to assess whether you're getting the most out of your saving.
Am I in the right fund?
KiwiSaver funds fall into four categories:
It's crucial to ensure you're investing in the right investment strategy based on your age, life stage and comfort level with risk. For example, the fund you initially invested in might not be right for you anymore, particularly if your financial situation has changed, or you've gone through a major life change, such as getting a mortgage. Switching to a different fund now could help you to achieve your goals faster.
At Fisher Funds, we offer Conservative, Balanced and Growth Funds, with a GlidePath option which auto-selects the appropriate fund based on your age and investment timeframe over the course of your life. Think of GlidePath as a set and forget strategy.
In general, lower-risk funds like Defensive and Conservative funds carry lower fees and are lower risk. But this can also mean you don't see returns as high as those in higher-risk funds. Balanced and Growth funds will generally provide you with higher returns over a longer term, but come with a higher level of risk, which you have to be comfortable with.
Not sure what fund is right for you?
If you're unsure which type of fund is right for you, take our questionnaire to help determine the right investment strategy for you.
When selecting your investment strategy, ask yourself these questions:
- What are my priorities? Long term growth or short term savings?
- How comfortable am I seeing my KiwiSaver balance go up and down?
- When do I plan on spending my KiwiSaver money?
Am I paying too much tax?
Did you know that the PIE tax statement for your KiwiSaver statement could be telling you that you're paying too much tax? Your KiwiSaver Provider calculates and pays the tax you are liable for on your behalf, and you are placed in a tax bracket based on your income. But are you in the right bracket?
Checking your tax rate
The PIR (Prescribed Investor Rate) on your KiwiSaver statement determines how much tax you pay on your investment. If you're on the wrong rate, you could be paying more than you need to in tax each year! You can see where to check your PIR rate on your statement here.
How your tax rate is calculated
You PIR is calculated based on your taxable income and your tax residency status. In general, if you earn less, you'll pay less, but there are other factors to consider. For more information on calculating your rate, head to the IRD website.
Have I been paid my Member Tax Credit (MTC)?
MTC's for the KiwiSaver year ending 30 June 2018 will be applied to your account by the end of July 2018.
If you contributed $1,042.86 to your KiwiSaver between 1 July 2016 and 30 June 2017 (and were between the ages of 18 and 65 for the 12 months of that same period) you should see a payment of $521.43 from the government sometime in July or August 2017 on your KiwiSaver annual statement. No strings attached! This is called the Member Tax Credit (MTC), which is the government's way of rewarding you for contributing to your retirement savings each year.
If you contributed less than $1,042.86, you'll see a smaller tax credit payment based on the amount that you contributed (calculated at 50 cents for every dollar, up to the maximum of $521.43).
If you missed out last year this is a great reminder to get your contributions set up so you get the full $521.43 every year.
If you're receiving a salary or wages
If you're between the ages of 18 and 65, earning more than $35,000 per annum and contributing at least 3% of each pay cheque to KiwiSaver, you'll have no problem reaching the maximum contribution and getting the full tax credit.
If you're self-employed or not working
Remember you can qualify for the MTC too! It's a good idea to either make a few one-off payments or set up a direct debit of $20 per week so that, over the course of the year, you contribute the full $1,042.86.
Log onto the Fisher Funds online portal now to make a one-off payment, set up a regular direct debit payment, or download a form to change your employee contribution rate to ensure that you'll get the full tax credit next year.
How healthy is your KiwiSaver Account?
Based on this quick three-step health check, how healthy is your KiwiSaver account? If you would like to discuss any element of your statement this year, get in touch — we are happy to help you optimise your savings.