KiwiSavers who follow some simple rules can achieve this target.

A small band of KiwiSavers are on their way to becoming millionaires. Although the average balance is about $9300, some KiwiSavers have grabbed the bull by the horns and are determined to retire with a tidy sum under their belts.

It can be done - but not on the 3 per cent KiwiSaver minimum, unless you're earning a good salary. If you're willing to commit more and keep saving without a break then it's definitely doable, says Binu Paul, managing director of Savvy Kiwi, which helps savers choose the right fund.

Of course a "millionaire" isn't what it used to be thanks to the ravages of inflation. But it's still an impressive number to have in investments other than your own home. And it's enough in today's money to give anyone with a freehold home a very comfortable retirement in addition to NZ Super.

Depending on how it's invested and withdrawn, a $1 million lump sum investment should return $40,000 to $50,000 sustainable income a year in retirement.


At New Zealand's largest KiwiSaver fund, ANZ, 715 Kiwis have more than $150,000 invested already. The average balance for these high rollers is about $238,000.

The biggest factor in whether people will make the million dollar club by the time they retire is the longevity of their investing, says Paul. A 25-year-old, for example, earning an admittedly good $60,000 only has to save the minimum of 3 per cent of income consistently over their working lives to make the $1 million club assuming a 6.5 per cent annual return after tax and fees, says Paul.

Delay starting for five years and you'd have to save 6 per cent a year to make it over the line. Beginning at age 35 means an 11 per cent contribution to reach $1 million, and someone who doesn't start their retirement savings until age 40 will need to put away a hefty 18 per cent. On an $80,000 salary the 25-year-old needs only to save 2 per cent and the 40-year-old 14 per cent.

Retirement projections often don't take inflation into account. A million dollars in 25 or 30 years' time isn't going to buy as much as it does today. For that reason Paul's figures look at what it would take to save the equivalent amount of money to get $1 million spending power at today's rates.

These figures assume that the money is invested in growth funds. If a 25-year-old chose a life stages type fund with ANZ, where their money is gradually moved from growth to balanced to conservative, they would need to invest $208 a week for $1 million in today's dollars, says John Body, managing director of ANZ Wealth.

KiwiSaver isn't the only option for retirement savings, although those investing elsewhere need to get a slightly higher return to cover the lack of government contribution.

There is an argument that paying the mortgage down is a better investment than KiwiSaver. Homeowners who do this get a guaranteed return of the equivalent of the mortgage interest rate on all the additional money paid down on the mortgage. That might be 4.5 per cent in today's market.

On the other hand, the investment return/growth on money paid into KiwiSaver isn't guaranteed. It can fluctuate - although in recent years returns on growth funds have been well above the 4.5 per cent mortgage rate.

Another advantage of investing money in KiwiSaver instead of the mortgage is that it's tied up and savers can't be tempted to dip into their funds as people do with their mortgages.

There are plenty of people, of course, who'd rather spend their money on living today. It's a gamble that could pay off for them if they don't reach retirement age or can live comfortably on New Zealand Super at the rates offered when they retire.

Those who do want to become KiwiSaver or similar "millionaires" by the time they reach retirement should follow these millionaire rules of thumb:

Be patient. Becoming a millionaire doesn't require that you earn squillions. Instead, it requires sacrifices and being serious about regular saving month in, month out. Saving 3 per cent of a low salary may seem pointless. But it is amazing how quickly it adds up to a meaningful sum of money for first-time savers as many KiwiSavers are.

Depending on how it's invested and withdrawn, a $1 million lump sum investment should return $40,000 to $50,000 sustainable income a year in retirement.


Tithe to yourself. Three per cent, even when matched by an employer, isn't enough to ensure that you live in the comfort you're accustomed to in retirement. If you want to live the same life as you do now, minus the work and child-related costs, then you may need to save up to 10 per cent of your income. If you're aged over 35 when you start, even that might not be enough to save for a secure future.

Don't panic. You need to be able to rationalise market crashes. Sooner or later markets will take a tumble then rise again. Thinking that you've "lost money" because the market has dropped is a mistake. That's volatility. You only "lose money" if you have to cash in your fund at that time.

Start young. The teenagers and those in their early 20s making regular contributions to their KiwiSaver accounts are most likely to retire with a million under their belts. That is if they don't withdraw it all in their early 30s to buy a first home, which is a dilemma.

Don't be greedy. Some investors watch their funds like a hawk and try to chop and change from one fund or provider to another. The reality is that people who chase last year's winning horse often choose funds that have peaked. It's best to choose a well-managed fund with as much growth as you can tolerate and stick with it.

Invest globally. You don't want all your eggs in one small basket such as the New Zealand and Australian economies. You're more likely to smooth out localised economic disasters if your money is spread across many countries.

Don't withdraw. KiwiSaver allows you to make hardship withdrawals. Many retirement investment funds worldwide don't allow this. Try to avoid it. Look for ways to change your budget to build up an emergency fund to cover you should a financial setback befall you.

Avoid the default funds. More than 500,000 Kiwis have their retirement fund in a conservative default fund. The reality is that they're going to have half as much to retire on as someone who earns and contributes the same but has chosen a growth fund, says Paul. That's based on a 3 per cent average difference in returns between default and growth funds over 35 years from the age of 30 to 65. Over the past five years, says Paul, the average return on the default funds was 5.4 per cent compared with 8.25 per cent. The big problem is that default-fund members often give their KiwiSaver no thought, says Paul, which means they don't know they should be investing in a different fund. "It comes down to the appropriateness of the individual investing in [the default fund]. You cannot say that a default fund is bad. The question is, is it appropriate for you?"

Invest in shares. Funds invested more in growth assets such as shares stand a better chance of keeping up with or outpacing inflation, says Paul. A conservative fund could be as low as 10 per cent shares and a growth fund up to 89.9 per cent.

Don't take contributions holidays. The impact says Paul on a 30-year-old, earning $65,000, contributing 3 per cent and adjusted to today dollars, of a five-year holiday is between $150,000 to $200,000.