Helen Twose: Take stock at 65-year milestone

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There can be benefits to keeping up contributions to scheme even after government tax credit stops.

If you are not yet 65 it's not too late to join KiwiSaver., says Blair Turnbull. Photo / File
If you are not yet 65 it's not too late to join KiwiSaver., says Blair Turnbull. Photo / File

Am I correct in thinking that once one is past 65 years, one no longer receives the government tax credit? Following on from this assumption, it does not seem that paying in $1042 by June has any incentive apart from boosting one's account with the provider.
Once you turn 65 and if you have been a member of KiwiSaver for more than five years then you will no longer be eligible for the government member tax credit.

If you can afford to contribute $1042.86 each year up until that time then it literally does pay to do so as the government will contribute $521.43 to your KiwiSaver account.

You can keep contributing to your KiwiSaver account once you are no longer eligible for the government member tax credit. Any contributions will of course be invested with the prospect of generating investment returns.

It may also provide diversification from other investments you may have but that should be considered as part of an overall investment plan.

•Carmel Fisher, Fisher Funds managing director.

Last week you spoke about keeping one's KiwiSaver account going after reaching the magical age of 65. (I intend to work until 68). Your contributor said that the government will stop giving us the annual tax credit when we reach that golden age. But we will still have to pay all the fees (management, etc) our KiwiSaver provider has. Would it therefore make more sense to take it all out and put it into a term deposit at the bank and avoid these fees? Or, on the other hand should I continue to contribute (and presumably so would my employer) to build it up?
Once you reach the age where you can withdraw money from your KiwiSaver account it is no longer compulsory for your employer to contribute even if you continue to do so.

That said, we have come across many employers who have decided to keep making employer contributions even though technically they don't have to. This is often as a goodwill gesture for loyal service or reflecting the fact that they would have to contribute if it was a younger employee.

In your situation it would make sense to understand whether your employer has a specific policy on this. If they do keep contributing then it makes sense that you do too.

While your money is invested in a KiwiSaver account you will still be charged fees as the key parties involved in managing and protecting your savings continue to perform their roles for your benefit.

For example, your investment manager will continue to research investment opportunities and manage portfolio holdings so your funds are invested in accordance with your chosen investment strategy.

This doesn't stop just because you've reached retirement age. This is the same across all KiwiSaver schemes.

The decision on whether to withdraw your savings and put it into a bank deposit should be about more than just the fees charged on your KiwiSaver account.

This presents a good opportunity to review your KiwiSaver account in conjunction with any other investments you may have so that your savings are invested in a fashion that is consistent with your appetite for risk, your investing timeframe and your investment goals.

It may be appropriate for you to be invested in some assets that offer greater potential return (and greater potential risk) than a bank deposit.

KiwiSaver is a relatively cost-effective investment solution to help you achieve that.

•Carmel Fisher, Fisher Funds managing director.

I will be 65 at the end of this year and I hope to work another five years. Is there any point in someone in my situation joining? I think it a good idea in principle but there may not be much advantage - I may have left it too late. I have a freehold house and $200,000plus in the bank. I'm not too concerned about employer's contribution, although that would be good.
Planning how you'll spend your retirement, how much you'll need to save and how to get there is time well spent.

Try online budgeting resources and talk to your financial adviser.

If you are not yet 65 it's not too late to join KiwiSaver.

In addition to the employer contribution, there are government benefits and potential investment earnings to help your savings along.

Important factors to consider are whether you can afford to contribute (minimum 2 per cent of your pre-tax salary, increasing to 3 per cent on April 1, 2013), and that you, because you are joining after you are 60, will not be able to access the funds until five years after you join.

As an illustration, if you join KiwiSaver on April 1, 2013 and contribute 3 per cent of your salary (we'll assume $40,000 a year) for five years, here's what your KiwiSaver savings might look like:

•Employee contributions: $6000

•Employer contributions: $4950

•Government contributions: $3607

•Investment earnings (3 per cent a year net of inflation, tax and fees: $964

•Total: $15,521

Visit www.sorted.org.nz/calculators to do a similar calculation with your own salary. You can also choose to contribute at 4 per cent or 8 per cent of your salary.

In answering this question we have not taken your personal circumstances into account.

This answer is not intended as financial advice.

•Blair Turnbull, ASB executive general manager of wealth and insurance.

•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.

To have your KiwiSaver questions answered by the Herald's panel of industry players email Helen Twose, helentwose@gmail.com.

- NZ Herald

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