Liz Koh: Timely reminder to reassess budget

By Liz Koh

About two million Kiwis now have just over $14 billion invested in KiwiSaver.

No doubt much of that amount is money that would otherwise have been spent. As their fund balances increase, many KiwiSavers are learning small amounts of saving made on a regular basis over a long time soon build up into a tidy sum.

On April 1, there will be another opportunity to earn, as the minimum KiwiSaver contribution for employees and employers is increased from 2 per cent to 3 per cent. That means those who are on the minimum contribution will have their take-home pay reduced by 1 per cent of their gross pay. For example, if you earn $50,000 a year, your KiwiSaver deductions will increase from $1000 a year to $1500 a year; an increase of around $28.85 a week.

It will be timely to have another look at your budget to see what effect this increase will have.

If it is simply not affordable at this time and you have been in KiwiSaver for at least 12 months, you can apply for a contributions holiday of up to five years.

There is no limit to the number of times you can apply for a contributions holiday and you can renew it at any time. But stopping your contributions should be a last resort option, because you will miss out on your employer contributions and your annual tax credit.

While you are reviewing your KiwiSaver, check your annual contributions are as close as possible to the optimum amount of $1040 per annum so you are neither missing out on part of your tax credit nor locking away more than you need to until retirement.

Check too, that the fund you are invested in has an appropriate balance of risk and return for your particular financial circumstances and goals.

Liz Koh is an authorised financial adviser. The advice given here is general and doesn't constitute specific advice to any person. A free disclosure statement can be obtained by calling 0800 273 847.

- Hamilton News

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