Recent research from the Financial Markets Authority (FMA) shows a “dramatic” shift in how Kiwis are investing their KiwiSaver funds. The proportion of assets in risk category 5 (high-volatility) funds has more than quadrupled, from 10% in 2021 to over 40% in 2024. Meanwhile, investments in low-risk funds have plummeted, from 30% down to 10%.
The shift is being driven by a growing awareness of one crucial fact: higher-risk investments tend to deliver stronger long-term returns. According to Morningstar, aggressive KiwiSaver funds have returned 9.34% per year over the past 10 years, compared to just 3.07% for conservative funds. That difference could mean tens of thousands of dollars more in your account by retirement, or more income during retirement itself.
The old idea that you need to go conservative at 65 was based on a different time. People are living longer and retiring differently. If you’re not drawing down your KiwiSaver savings all at once, and most people aren’t, you could still have 20–30 years ahead of you. That’s a long time to stay too conservative.
And while volatility can feel uncomfortable in the short term, history shows markets tend to reward patient, long-term investors, especially those who have time on their side.
Are we ready for retirement? Many say no
And yet, despite the long-term opportunity KiwiSaver presents, many New Zealanders still don’t feel prepared. According to the Financial Services Council (FSC) Financial Resilience Index 2025, only 44% of New Zealanders feel prepared for retirement.
It’s a worrying figure – and for many, staying in conservative or defensive funds for too long may be part of the problem, quietly widening the gap between what they have and what they’ll need in retirement. While these funds offer greater short-term stability, they may struggle to outpace inflation over time. Data shows that over the past decade, even
balanced funds have outperformed conservative ones, and aggressive funds have performed even better.
This means that for many people approaching 65 or even well into retirement, staying too conservative could unintentionally erode their future spending power.
It’s about time, not just age
Your investment strategy at retirement shouldn’t be based solely on your age, but rather your time horizon. In other words, when you actually plan to use the money. If you’re retiring at 65 but don’t plan to access most of your KiwiSaver savings until you’re in your 70s or 80s, you may benefit from staying in a growth or balanced fund for longer.
This aligns with global trends too. Internationally, many retirement experts are now advising against a sudden shift to ultra-conservative investments. Instead, they recommend a phased approach, where retirees continue to hold a mix of growth assets to support long-term spending needs – particularly in the face of inflation and rising living costs.
It’s about balance. For some investors, it makes sense to dial back risk a little if they’re making withdrawals soon. But for others, especially those with other sources of income or who want their KiwiSaver savings to last, staying in a more growth-oriented fund can make a big difference.
Risk is part of the ride
Of course, growth funds aren’t right for everyone. The market sell-off in March 2025, triggered by renewed tariff announcements from U.S. President Donald Trump, is a reminder of how quickly market sentiment can change. Growth funds, which tend to hold more equities, were more affected than conservative funds during that period.
That’s why it’s important to understand your comfort with risk and your short-term needs. If you’ll soon be relying on your KiwiSaver savings for regular retirement income, protecting your capital may matter more than chasing higher returns.
But it’s not an all-or-nothing decision. Many KiwiSaver providers, including Generate, offer the ability to split your KiwiSaver investment across multiple funds, giving you a way to balance long-term growth with short-term stability. For example, you might choose to keep a portion of your savings in a conservative fund for upcoming income, while leaving the rest in a growth or balanced fund for later.
And if you’re unsure, there’s one simple step that can make a big difference: get expert advice.
Make your KiwiSaver work for you
KiwiSaver is a powerful tool, but it’s not set-and-forget. The fund you’re in should reflect your goals, your timeline, and your appetite for risk - not just your age. An expert adviser can help you understand your options, run the numbers, and make a plan that’s right for you.
At Generate, we believe advice is a key part of long-term success. Our job isn’t just to recommend a fund, it’s to help you feel confident and informed about your future.
Retirement today looks very different than it did 25 years ago. It’s time our investment habits caught up.
Generate is a Kiwi-owned investment manager helping over 170,000 New Zealanders grow their long-term savings through KiwiSaver and Managed Funds.
To see Generate’s product Disclosure Statement, go to generatekiwisaver.co.nz/pds. The issuer is Generate Investment Management Limited. Past performance is not indicative of future performance.
