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QUESTION:
My husband and I both retired recently at the age of 65. We transferred our bank savings into our KiwiSaver accounts, as interest rates are so low. We now have just over $200,000 between us. We are planning to withdraw a regular amount to help with our weekly living expenses. This would be easier if we could combine our two KiwiSaver accounts into one joint account. Is this possible?
ANSWER:
KiwiSaver account can only be owned by one person, it cannot be owned jointly with someone else. Nor can it be owned by a family trust.
While it may seem cumbersome to manage two KiwiSaver accounts, there are advantages. If you are with two different providers, you will get different investment styles — active vs passive for example. While one manager may underperform at certain times, the other may excel. You could use one KiwiSaver account for withdrawals — selecting a lower risk fund with less chance of a sharp drop in value — leaving the other KiwiSaver fund in a higher risk strategy to grow over the next 10 to 20 years.
How much do you plan to withdraw? Currently, a couple over 65 receives $652 per week from NZ Super, after tax at M rate. If you want $200 a week from your KiwiSaver, at a 3 per cent average net return your $200,000 will last around 29 years before you run out of money. You can review the balance annually and adjust your expectations and your budget as time goes by.
There are other good reasons for KiwiSaver to be individually owned. The largest number of members are in the 25-34 age group, who in the past are unlikely to have had investments other than a car and a home (with a mortgage) at that stage in their lives. KiwiSaver is teaching this younger generation about investing, and the benefits of saving. As fund balances grow, people will gain confidence from knowing that they have an asset in their own name. KiwiSaver is difficult to access and this will also benefit many people who find it hard to say no to family members asking for a handout. Having an asset in your own name is particularly empowering for many women who in the past may have been cautious about investing. Since KiwiSaver started in 2007, women have outnumbered men as members. Government figures show 1.49 million men and 1.54 million women in KiwiSaver as at March 31, 2020. While women may think that investing is either too boring or too complicated, it is generally believed that they do a better job. They are less inclined to make frequent trades.
If you continue with your separate KiwiSaver accounts, and would like your husband to inherit the proceeds of your account when you pass away, all you need is a valid will setting out your wishes. Your KiwiSaver is treated as any other asset that you own, and your executors will pay out the proceeds according to your wishes.
Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free of charge by calling 06 870 3838 or go to peak.net.nz. The information contained in this article is of a general nature and is not personalised. Send your KiwiSaver questions to shelley.hanna@peak.net.nz