ECONOMIST Bernard Hickey's excellent column in the Herald and on our page 9 nicely sums up some of the fortunate pitfalls of KiwiSaver. Fortunate, in that the system is working very, very well. I am astonished by how effective it is as a means of saving for retirement. I still regret cashing in my Government Superannuation back in the nineties because I wanted to buy my first home computer. It was said that nothing will ever be as good as Government Super, but KiwiSaver comes pretty close.
Hickey writes about the "cashing in" issues, and lack of independent, inexpensive financial advice out there. I would agree with him on the advice part. I have always found it difficult to obtain financial advice that I could properly relate to, even with my private Super scheme, which I started back when KiwiSaver didn't exist. Perhaps it is a malaise of the younger person that the years ahead, and the concept of retirement, is difficult to relate to. It's likely that's why KiwiSaver works so well. It's basically a matter of: just do it, sign here, and it will work out. That's not advice that applies to everything, but in KiwiSaver it certainly does.
Possibly the best advice is, sure, if your KiwiSaver fund can be used to kickstart you with your first home, go for it. KiwiSaver has provisions for that. But anything less, just stick with it. You'll be entitled to make regular, tax-free withdrawals at 65, or extract the lot and reinvest.
I don't know if you've noticed it yet, but there are some people out there who make retirement look good (my parents, for a starter).
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In fact, retirement is probably fabulous with good health, a home and money in the bank. But it is also readily apparent there are people who eke out an existence in pensioner flats, who haven't enjoyed the advantages of savings.
When you're young, your job makes money. When you're retired, money makes money.
It's interesting that your parents, who are forever setting an example when you're young, should continue to set an example by living well when they're retired. "Investments" and "returns" and "portfolios" can be tricky terms, so here's an easier example.
You want to retire with a nice car, trips to see the grandkids and roast lamb with pinot noir on the table? KiwiSave now.
Otherwise life can be cruel.