Your KiwiSaver questions answered

Wednesday, 18 March 2020

Movements in the financial markets have had an impact on many New Zealanders' KiwiSaver accounts.

Stuff put some of your questions to industry experts and fund managers.

While the responses are not personalised financial advice, and individuals should contact their provider or adviser for help for their own situation, they may give some indication of the sort of action you might take.

My KiwiSaver has a balance of $89,000 which has fallen from $99,000 in the last month. I only have four years until my retirement. Would you still advise not to change my risk allocation?

* Budget Buster: The art of swallowing dead rats

* Retirees told to take more care in planning how to use KiwiSaver funds****

The answer to this question depends a lot on what fund you are in at the moment and your retirement plans.

That sort of drop indicates you are probably (although not necessarily) in a growth fund.

Moving out now would cement the losses that you've suffered. It's hard to predict whether there are further steep declines ahead that it would guard against.

But you may have more time to ride out the market volatility than you think. You plan to retire in four years' time, but do you need all the money then? If you had to wait a couple more years (in which time your growth fund should have bounced back) to draw down your KiwiSaver, could you cope?

Generally, if you have more than five years, you can handle the volatility of a growth fund. If you want your money within five years, you should be in a balanced fund, and if you want it within three years, a conservative fund.

I turned 65 in late January at which time my KiwiSaver fund was at about $57,000. It has been dropping in value over the last few weeks and I noticed today it's down $150 overnight. I don't have a lot of money and work part-time to supplement my super.

Should I take it all out and put it into a bank account? Make a partial withdrawal? Or leave it as is?

Markets have wobbled, and that's shaken some KiwiSaver investors.

If you're already in a conservative fund, you have probably lost about 2 per cent of your balance so far.

If you need all your money immediately, you might want to withdraw it - but otherwise, as long as you're in an appropriate fund for your circumstances, you are probably best to wait the current downturn out.

Check in with your KiwiSaver provider or an adviser, though, to give you some tips and make sure that you're on track.

I am 65, still working full-time, with $40,000 in a conservative fund. It was $42,000 a couple of weeks ago.

I have applied for a savings suspension for three months and will use that money (10 per cent of my salary) to pay down debt until the market picks up.

Should I draw out all the KiwiSaver money and put it in the bank, even at no or little interest, to avoid it going down further? I intend to retire in two years.

If you are intending to use your money in two years, then a conservative fund would seem appropriate on the face of it. (Get advice to confirm this, though).

A savings suspension and diverting the money to debt could be worthwhile if you pay more in interest than you get from your investment.

But the good thing about sticking with KiwiSaver in a falling market is that you buy more units at a cheaper price. When prices recover you benefit even more from the gain.

I am in a balanced KiwiSaver fund and have been since 2008, I and have about $85,000 balance, Last two weeks I have lost about $7000. I am 57 and plan on working to 70. I have been on the phone to my fund manager and his advice is to stay the course and if I don't stay the course and move to a conservative fund, I will lock in the loses.

Susan, am I making the correct decision based on I want to retire in another 13 years?

Yes, stay the course. Thirteen years is enough time for markets to well and truly pick up again.

You might even want to take a bit more risk now to make the most of cheaper prices, but that's something to discuss with your provider or adviser.

As you get closer to retirement, dial back your risk.

I'm not earning and have no income to put into my KiwiSaver. I won't get the pension for another seven years. Should I put my KiwiSaver money in a cash fund then change to conservative or stay conservative until it picks up then go more aggressive?

The problem with all of these options is that you need to be able to time the bottom of the market - not even experts can do that.

The best option is to complete a risk tolerance questionnaire, which most providers have on their website, and select the fund that best matches your appetite for risk and investment time horizon.

Seven years would usually suit a balanced to growth fund, provided you are comfortable with a bit more risk.

Sorted also offers some tools to help determine your risk profile, or you could seek advice from an independent adviser.

Your advice to hold tight and not to panic makes great sense for those who are in for a long term, but what advice would you have for the likes of me who is 70 and perhaps only has (hopefully) another three to five years of employment? My KiwiSaver balance is quite small at $25,000 and if it takes a significant hit in the next few months, I am concerned I won't really have the time for it to bounce back. I am very tempted to withdraw the majority of the $25,000 to ensure its safety. It's a bit of a conundrum and probably only me who can ultimately make the decision either way, but I would appreciate your views.

Fund managers say that if you have three to five years of investing left, that's enough time for a balanced (and maybe growth) fund to recover.

You could also do a risk tolerance questionnaire to test your appetite for risk. The only guarantee with drawing out now and putting in the bank is you will be realising current paper loses and will never be able to get those back in a bank deposit.