These small KiwiSaver mistakes could cost you $200,000 in retirement savings

Saturday, 21 February 2026

More than one in five New Zealanders say they don’t know what they will do once the default KiwiSaver contribution rate increases from 3% to 3.5% in April.

A further 10% of those surveyed say they will request a temporary reduction in contributions back to the original contribution rate, while a further 3% of Kiwis intend to request a contribution suspension altogether.

These findings, which come from a poll conducted by Horizon Research on behalf of ANZ across all KiwiSaver providers, serve as a stark reminder that the benefits of the increased KiwiSaver contributions may not be as far-reaching as initially expected.

Fortunately, there is also some positive news to be taken from this study. Around 34% of respondents said they would stick with the new 3.5% rate, while 21% said they would increase their contribution above 3.5% if their employer matched it.

ANZ Investments managing director Fiona Mackenzie says increasing contributions is a key way to build wealth and increase financial wellbeing.

“We know when personal and household budgets are stretched, this can be a challenge, but we continue to see Kiwis positively engaging with KiwiSaver, as a pathway to home ownership as well as planning for life after 65.”

Mackenzie isn’t wrong in terms of the difference this could make, as the Government starts to lift those contribution rates.

Numbers from Te Ara Ahunga Ora Retirement Commission show that for a person who is currently 35 years old, on an average salary (approximately $80k per year), a 4% default contribution rate (employee and employer) would result in a 25% higher KiwiSaver retirement balance at age 65 compared to the current settings.

Put another way, if we had maintained the previous settings of employers and employees contributing 3% each, that worker would have $685,000 by retirement, if their money was in a growth fund.

Under the plan to increase contributions to 4% each by 2028, the same worker would have $860,000 in savings (both calculations are based on the assumption of annual salary growth of around 3.5% per annum, as per standard Treasury figures).

Another consideration here is your fund choice. Even if you did increase your contributions to eventually reach 4%, leaving that money in a balanced rather than a growth fund could cost you in the long run. In a balanced fund, the money would come to $620,000, approximately $240,000 short of the growth fund figure.

The underlying point here is that even seemingly small mistakes can add up over time.

Failing to increase your contributions by even a few percentage points or sitting in the wrong fund can cost you dearly if you leave it too long. The longer you wait, the less time you give that money to compound.

The magic of dollar cost averaging

To understand how this works, you need to understand how the concept of dollar-cost-averaging works in investing.

“Dollar cost averaging sounds complicated, but it’s actually simple, and one of the easiest ways to build wealth over time,” Mark White-Robinson, the co-founder of fintech app Feijoa, tells me.

“By setting up regular automatic investments, you don’t need to worry about timing the market. You just keep going. When prices are high, your money buys less. When prices are low, it buys more. Over time, that helps smooth out the ups and downs and gets you a great price.”

This is the thinking behind the Feijoa app, which rounds up everyday purchases and automatically invests those small amounts into KiwiSaver.

It’s also fundamental to the concept of regular KiwiSaver contributions. By contributing regardless of what the market is doing, it becomes far less important to time the market.

Mark Lister, the investment director at Craigs Investment Partners, tells me this doesn’t mean you’ll always get a great price for your investments, but it does work over the long-term.

“You will end up buying at some bad times, but you'll also inevitably end up picking up some bargains when things are bombed out and cheap, and it all sort of comes out in the wash.'

Dollar cost averaging also takes the emotion and the market noise out of the equation by ensuring that you stay the course with your strategy regardless of whether things are going up or down.

“Not many of us would have bought in the depths of the GFC or in the depths of Covid, but KiwiSaver forces us to because it's happening mechanically,' says Lister.

The added advantage is that this money is locked away beyond the reach of discretionary purchases, allowing it to really do that long-term work.

'For people who are maybe not that good with money and know they're not that good, contributing more to KiwiSaver will actually help their cause because it will force them to grow that nest egg.'

However, so much of this still depends on our volition and whether or not we’re willing (or able) to contribute an extra few percent to KiwiSaver.

“Our contribution of 3.5% is still teeny tiny, and it should be a lot higher,” says Lister.

“The Aussies are in such a strong position because they're above 10% and going higher.'

The liquidity question

Making changes to your KiwiSaver contributions can benefit your long-term financial wellbeing, but you always need to balance this with your need for cashflow.

Whether it’s your mortgage or KiwiSaver, so much of our wealth these days is tied up in assets that can’t quickly be converted to cash. This is referred to as liquidity. The more liquid an asset, the easier it is to convert to cash.

Selling a house or using a hardship claim to withdraw money from KiwiSaver can both be arduous tasks if you need money on short notice.

Getting that balance right largely depends on your personal circumstances, says Robyn Conway, the general manager of managed funds at Fisher Funds.

You want to be able to have emergency savings that you can access on short notice, so that you have choices,” says Conway.

Those funds don’t necessarily have to go into a low-interest savings fund. They can also be put to work via a managed fund or other investments, where they are more accessible.

Conway says there are good reasons to keep your investments in more liquid funds, including house renovations, starting a business down the line, investing in property, or paying for education, but the effectiveness of this strategy is always contingent on your ability to resist the temptation to spend.

But there’s a big disclaimer that comes with this: you. If you don’t have the self-control , it simply doesn’t work.

'I’m a financial advisor and I know everything I need to know about those things, but I like the fact that I can’t access my superannuation [KiwiSaver],” Conway says.

“I’m putting money into that as well as a managed fund, but they have different purposes in my mind.'

A managed fund on the side could, for instance, be a good strategy if you’re looking to regularly invest funds independently to cover the cost of your child’s education in the future. There’s nothing wrong with this, as long as you stick with the plan and don’t diverge.

Conway says that getting that balance right between liquid assets and those locked away will largely be dependent on what the individual is trying to achieve, and that mix can also change over time as we move through life stages.

The key here is setting a strategy and then ensuring it is still fit for purpose as you move through your career.

As one in five Kiwis mull what they’re going to KiwiSaver in the coming months, a good starting point would be determining what you actually want to achieve in the coming years and decades and how you plan on getting there.

It makes no sense to start a journey if you don’t know where you’re going in the first place.

So what’s your KiwiSaver strategy? How much are you contributing? And how do you maintain liquid funds on the side? Let us know in the comments section below.

Disclaimer: The information in this article is of a general nature and is not intended to be personalised financial advice. It does not take into account your individual circumstances or financial goals.