More KiwiSaver questions answered as investors worry about market wobbles
Thursday, 19 March 2020
OPINION: 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.
READ MORE: Your KiwiSaver questions answered
If you're already in a conservative fund and your balance has stayed stable wouldn't it be a good idea once we're at the bottom of this virus thing to change to a growth fund?
Sure, if you can pick the bottom. Not even fund managers can do that with any success. Most people only realise things have picked up once they've well and truly bounced. By then, you missed out on a lot of the return.
I have had a KiwiSaver account for more than five years and my account has dropped more than $2000.I am not working and this is very frustrating me. Can I withdraw my money and put that into a bank?
You can only withdraw from KiwiSaver when you hit 65, if you're buying a first home or if you suffer significant financial hardship.
I have mine invested with ASB conservative fund, and it's dropping by the day. Would you suggest I move it to the growth fund, and if I do will I possibly lose more as I move across?
A growth fund has more exposure to the share market than a conservative one. You might lose some of your balance if you transfer across because the share market may drop further. But you'll be buying the growth fund units at a cheaper price, meaning you get more for every contribution you make, so your balance should recover well when the market picks up again.
Think of it like buying cans of baked beans - at the moment the beans owned by the growth fund are cheap. In a year's time they may be back to normal price. If you transfer across now, you can buy more cheaper baked beans, which you can one day sell when they're expensive again.
But you should get financial advice from your KiwiSaver provider or a financial adviser to make sure that this is the right decision for you.
You need to be comfortable with how the fund might respond to the market's movements - if it's going to worry you to see your balance fall, then a growth fund might not be the best place for you. Your KiwiSaver provider should be able to help or point you in the direction of someone who can.
I am due to retire in three years and at present am putting 10 per cent of my wages into KiwiSaver. It has dropped $7000 in a matter of weeks. I am in the moderate fund. Should I change to conservative but more importantly should I drop back to 3 per cent whilst the recession is here please?
As I said above, when you're putting money into your KiwiSaver at the moment, you're buying more units in that fund at a lower price. When the market recovers, all those extra, cheaper units you've bought will be worth more and your balance will shoot up.
Financial adviser Liz Koh recommends retirees have enough in cash to cover their spending for the next five years (on top of the pension). That gives you time to live off that money and wait for the market to recover. In your scenario you might dial back your KiwiSaver contribution and instead put it into a bank savings account to amass a chunk of capital you can live on while the markets do their thing.
(Get personalised advice or chat to your KiwiSaver provider if you're worried though)