People who raid their KiwiSaver to buy a first home could end up with much less in the pot for their golden years - but experts say it could still be worth it.

The Financial Market Authority's annual KiwiSaver report shows 14,584 took a total of $213 million out of their retirement savings in the year to June 30 - an average of $14,604 per person.

For a 30 year old earning $57k a year that could leave around $37k less in their KiwiSaver at 65 compared to someone who left the money in.*

That would shrink their potential savings pot from $224,000 to $187,000 and for someone living to age 87 reduce their potential annual income from $10,541 a year to $8,814.


From April this year people have been able to take more money out of their KiwiSaver accounts after the government changed the law to let savers take out the member tax credits on top of their own and their employer's contributions.

Savers can now remove all bar $1000 from their accounts to buy their first home sending their retirement savings nearly back to square one.

But it's not just the amount people take out that will be missing from their retirement pot at 65 - they will also forego the returns they could have earned by having the money invested and the compounding effect of that over their lifetime.

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Hope for first-home buyers

Ana Marie Lockyer, general manager products and marketing at ANZ wealth, said it was important for people to remember the primary purpose of KiwiSaver was to save for their retirement.

"After all, you can't eat your house."

But home ownership was also an important part of people's overall wealth, she said.

David Boyle, general manager of investor education at the Commission for Financial Capability, said one of its biggest concerns was that fewer people were owning their own home in retirement.

Home ownership gave people more certainty over accommodation costs in retirement and meant savings could be spent on having a comfortable life instead, he said.


"If you want to enjoy a reasonably good retirement one of the most important things is to ensure you have your own home and don't have any debt owing on it."

"If not, then you will have to save a truck load more because you will have to rent in retirement."

Boyle said taking money out of KiwiSaver and using it as a deposit would hopefully mean people could pay off their mortgage sooner or pay less interest over the term of the debt.

"It's like the power of compound interest in reverse. Over 20 to 30 years all of that interest piles up."

It's like the power of compound interest in reverse. Over 20 to 30 years all of that interest piles up.

But Hannah McQueen, a financial personal trainer at EnableMe said the risk was that people got a mortgage and did not pay it down.

McQueen said a lot of Kiwis did not pay off their debt but kept adding to it by up-sizing their home or putting a car or a holiday on the mortgage.

"If you are going to top-up your debt then keep it in KiwiSaver."

McQueen said it was a tough call as most young people were not thinking about their retirement.

"All they are trying to do is get on the property ladder. Most just want to get on to the ladder as soon as possible."

"I don't think they are considering the opportunity cost of the decision at all."

Lockyer said it was important people continue to contribute to their KiwiSaver fund after they had taken the money out for a first home.

"KiwiSaver is a long term savings vehicle and the benefits accumulate as you contribute over time so it's important to start contributing to KiwiSaver again once you've made a first home withdrawal and even consider contributing more to catch up."

*Figures are based on a 30 year old earning an annual income of $57,000 a year who contributes 3 per cent of their salary to KiwiSaver and has salary inflation of 2.5 per cent and is invested in a lifetimes fund.