Buy first house, retire immediately

Your KiwiSaver funds can be used for your retirement home, but it may be too late to get a HomeStart grant. Photo / Getty Images

I am in KiwiSaver and have decided to pump funds into it until I buy my first home at about 65. I intend to purchase a small cottage for my wife and me, paying in full using savings and KiwiSaver. Will I have to buy the house before the present cut-off pension age of 65 or can I still buy a first house if I am a KiwiSaver contributing member working past 65? I presently earn too much to get the KiwiSaver first-home subsidy but may work fewer hours in later years. Would I still qualify for the first-home grant?

What rules apply depends on when you decide to buy that first home.

Once you reach 65 and have been a KiwiSaver member for five years, you become eligible to empty your KiwiSaver account and do what you want with that money.

"You can remain a contributing member of KiwiSaver after 65," says Joe Bishop, head of retail and marketing at Gareth Morgan Investments.

"Although, once you become eligible to withdraw, your employer is no longer legally required to make contributions.

"You will also no longer be eligible for member tax credits from the Government.

"You can choose to withdraw as much or as little from your KiwiSaver account as you want and you are free to use your funds to buy a first home without having to apply for a first-home withdrawal," says Bishop.

In answer to whether you will still be eligible for the HomeStart grant, there is no upper age for getting the grant and you may be able to get the funding boost if you are using the KiwiSaver early withdrawal to buy a first home and meet all the HomeStart eligibility criteria for contributions and salary levels.

But if you're withdrawing your funds more than five years after you join, or after the cut-off age of 65, whichever is the later date the additional HomeStart funding is no longer available.

The HomeStart grant is overseen by Housing New Zealand and gives you $1000 for each year you contributed to KiwiSaver, to a maximum of $5000 for a single buyer, or $10,000 for two or more buyers.

The grant doubles - up to $10,000 for a single buyer or $20,000 for a couple - if you're buying a new or off-the-plan home.