Expert advises a fund review after buying your first home.

Last year, more than 35,000 Kiwis withdrew a record $1.24 billion from KiwiSaver to buy their first home, according to the Financial Markets Authority (FMA). However, many may be losing out on tens of thousands in retirement savings by not adjusting their KiwiSaver fund post-purchase.

Milford senior KiwiSaver financial adviser Liam Robertson warns neglecting to reassess your KiwiSaver fund setting could cost you up to $93,000 in retirement*. “Many people think switching funds is more difficult or time-consuming than it actually is,” he says. “They make that first home withdrawal, they forget about their KiwiSaver, and they don’t move their KiwiSaver fund to a more aggressively styled option where that is appropriate.”

‘You can’t eat your home. It won’t pay your bills’

The FMA’s 2024 report shows positive trends for KiwiSaver members. Total funds in the scheme as at March 31 reached $111.8 billion, up 19.3% from the previous year, marking the strongest growth since 2021. Investment returns were strong with $13.1 billion in gains, close to the record high of $13.2 billion in 2021.

Contributions increased to $11.2 billion, with members accounting for $6.9 billion of that rise, indicating greater engagement. Under 35s are contributing more regularly, indicating growing awareness of the importance of long-term saving to help fund retirement. However, many are still in conservative funds, which could limit growth in the value of their KiwiSaver over time.

“KiwiSaver isn’t just for fun at 65, it’s a source of income,” Robertson explains. “People often think that contributing 3% is enough because that’s the minimum contribution level, but they’re shocked when they see the numbers. You can’t eat your home. It won’t pay your bills.”

KiwiSaver funds generally fall into three main categories: conservative, balanced, and growth. Conservative funds, which focus on preserving capital and with investment typically directed to bonds and cash, are considered lower-risk and ideal for short-term savings. These funds, however, tend to offer lower returns over time. Balanced funds mix growth potential with moderate security, while growth funds, which invest heavily in shares, carry more risk but typically provide higher long-term returns for those with a longer savings timeframe.

Key steps for members following first home purchase

• Reassess your fund: “Review your KiwiSaver fund shortly after buying your first home to ensure you’re invested appropriately,” Robertson says. “Your financial goals have shifted. Make sure your fund matches those new long-term objectives.”
• Explore fund options: Post purchase of their first home, members who are in a conservative fund should consider moving to a balanced or growth fund to improve their long-term savings potential. This is particularly the case for those who are more than 20 years away from retirement. Robertson notes, “If someone is 37, earning $60,000 and contributing 3%, staying in a defensive or conservative fund might leave that person with about $185,000 at 65. But switching to a growth fund could boost that to $278,000. That could provide $319 a week until you’re 90.”**
• Seek advice: Professional financial advice can help people make informed decisions and get the most out of their savings. “KiwiSaver can improve your lifestyle post-65, especially if the pension isn’t enough,” Robertson says. “Taking risk with KiwiSaver is a calculated decision. It’s not like going to a casino.”
• Increase contributions: Even small adjustments to a contribution rate can help. “There’s about $500 million left on the table every year because a million people aren’t contributing enough to get their full government contribution ‚” Robertson explains. “For every dollar you contribute up to $1042 each year, you get 50% from the Government. That’s an investment return you can’t get anywhere else.”

Milford offers financial advice to help people maximise their Milford KiwiSaver Plan balance and secure a stronger financial future. If you would like financial advice about the Milford KiwiSaver Plan, you can speak to one of our KiwiSaver Financial Advisers on 0800 662 348 or at kiwisaveradvice@milfordasset.com

Want more investment insights? Check out Milford’s The Investing Place for exclusive masterclass content, news and opinion pieces.

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 milfordasset.com Before investing you may wish to seek financial advice. For more information about Milford’s financial advice services visit milfordasset.com/getting-advice 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

*ird.govt.nz/kiwisaver/datasets

**Assumptions made, using the Sorted KiwiSaver calculator:

• Fund: Defensive Fund (1.5 per cent p.a.) and Growth Fund (4.5 per cent p.a.)
• Income: $60,000 p.a.
• Age: 37
• Retirement age: 65
• Wages/salary will increase each year by 3.5 per cent.
• This calculator assumes your government contribution entitlement will continue until retirement age of 65, up to a maximum of $521.43 per annum.
• Employee, employer, voluntary and government contributions stop at the retirement age, 65.
• No withdrawals before retirement age.