Helen Twose

Personal finance and KiwiSaver columnist at the NZ Herald

Helen Twose: KiwiSaver top-up before kids can pay dividends

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If you are able to top up your retirement savings prior to having a family it will have a significant impact on the total at retirement. Photo / Thinkstock
If you are able to top up your retirement savings prior to having a family it will have a significant impact on the total at retirement. Photo / Thinkstock

I read the other day about women hitting retirement with less in the kitty than men.

Obviously taking time off for kids and then maybe not returning to full-time work could account for some of the difference.

One of the solutions offered was to pump up retirement savings in the years prior to starting a family to cover for the period of reduced or no income.

Firstly, is this possible with KiwiSaver?

What sort of numbers are we talking to bridge that gap?

Are there any calculators or equations that can work out what sort of contributions increase would be needed?

You can make a voluntary contribution into your KiwiSaver account at any time.

The earlier you start saving the more you will have in retirement.

If you are able to top up your retirement savings prior to having a family it will have a significant impact on the total at retirement through the power of compounding returns over time.

For example, if at 25 you have $10,000 saved for retirement and this investment returns 10 per cent per annum (after tax and fees) over the next 40 years, you will have over $450,000 at 65.

There are no guarantees of ongoing positive performance but the example highlights the more money you can save early on will have a big impact through compounding returns over the long-term.

Websites sorted.org.nz and interest.co.nz have a number of calculators which you may find useful in establishing what your saving targets should be.

Sarah Mitchell, Milford Asset Management retail product manager.

If a husband and wife both have KiwiSaver accounts are they both "matrimonial property"?

KiwiSaver, like other assets accumulated during marriage, would be considered "matrimonial property".

The Trustee of a KiwiSaver Scheme must comply with the provisions of any enactment or order of any Court (such as under a property sharing order under the Property Relationships Act 1976) that requires a member to pay some or all of their scheme entitlement (in accordance with the court order).

However, I am not aware of any case law to provide precedent as to how this would be dealt with.

Sarah Mitchell, Milford Asset Management retail product manager.

Do schoolchildren with KiwiSaver accounts get subsidies or "tax benefits" from deposits, for example, by grandparents?

Only people age 18 and above are eligible for the Member Tax Credit (MTC) benefit.

However, everybody (including school children) receives the $1000 kick-start from the Government when they first open a KiwiSaver account.

Sarah Mitchell, Milford Asset Management retail product manager.

I joined KiwiSaver when it first started and I was employed full time.

Over the last two years I have been employed on an occasional basis and topped up any shortfall in KiwiSaver payments each June to $1043 to ensure I received the tax credit.

Can I get the 2012/2013 tax credit on a pro rata basis for the 10 months from June of this year until I turn 65 next April?

You are entitled to a tax credit for the 10-month period from June 2013 until you turn 65 in April 2014.

The exact amount of your tax credit will depend on the amount of your contributions over that period.

A pro rata calculation may be involved to determine the exact amount.

Sarah Mitchell, Milford Asset Management retail product manager.

Disclaimer: Information provided is stated accurately to the best of the respondent's knowledge at the time of publication. It is general in nature and should not be construed, or relied on, as a recommendation to invest in a particular financial product or class of financial product. Readers should seek independent financial advice specific to their situation before making an investment decision.

- NZ Herald

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