Each week the NZ Herald and Newstalk ZB's Cooking The Books podcast tackles a different money problem. Today, it's why KiwiSaver default schemes are a horrible idea, and what to do about it. Hosted by Frances Cook.

If your KiwiSaver is in a default scheme, you're throwing money away. You're going without, saving some money each pay day, and yet you could still be in hard times when you finally retire.

Imagine that. You willingly stash money away each pay day, thinking you're doing the right thing, and then when retirement comes you still have to scrimp and save.

When, for the sake of a few clicks at your computer, you could have made the exact same savings, and had a cushy retirement.

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I'm not exaggerating, and that's why it's extremely worrying that 445,000 people are in default KiwiSaver accounts. We're coming up to 10 years of KiwiSaver existing, and yet, hundreds of thousands of New Zealanders haven't even looked at where their money is going.

It's a false security to think you're saving diligently, without realising you're in the wrong account and so barely getting anything out of it.

If you signed up to KiwiSaver, never picked an account, and left it at that, then you're in a default account. But the default schemes were never intended to be permanent.

They're conservative, meaning your money is safe as houses, but you will also likely get very little return.

Imagine someone in their 20s, saving into a conservative account for their entire working life. They're not just throwing away thousands, they're throwing away hundreds of thousands of dollars. For something that takes only a few clicks of a mouse to fix.
It's time people realised how big a mistake this is, and how easy it is to fix it.

So I gave Tom Hartmann, resident blogger for sorted.org.nz, a call.

To give an example he ran the numbers on me, a 28-year-old earning a fairly average salary.

If I made the minimum payments, a best case scenario for a conservative fund was around $285,000 when I retired. But in a growth fund that leapt $200,000, to a total of $485,000 when I retired.

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Those are no small potatoes.

Hartmann agreed with me that picking the right KiwiSaver fund could be the difference between scrimping in your retirement, and enjoying it.

That's where Sorted comes in. The reason I tracked down Hartmann for this episode was because of my own experience with trying to figure this all out.

Not so long ago I had a nagging voice in the back of my mind, reminding me I was young and should be out of a default scheme and into a growth KiwiSaver account. But because I never knew where to start, it got put off for around three years.

When I finally googled it, Sorted's Fund Finder popped up. It asked me a couple of questions, ranked my options, and I knew where I wanted to go after about 15 minutes.

It was embarrassingly easy.

Hartmann said my experience was exactly what they were aiming for. They'd cut the Fund Finder back to the simplest necessities, to make it easier for people to use.

"It helps you choose from the entire market that's out there, about 222 funds that are on there.

"But sorting through 222 funds is not any kind of fun, so the machine helps you narrow it down quite quickly.

"There are three quick questions on what kind of fund would be appropriate for your situation. Then you can sort by important things such as fee levels, the services that come with the KiwiSaver fund, and have a look at how the fund has been doing up until now."

The most important thing is that you make an active decision about your KiwiSaver fund. If you're about to buy a house, or are retiring soon, then a conservative fund might actually be a good idea.

But if you've got decades to retirement, or even several years, you should check whether a growth fund is a better idea for you.

"It can be a little bit of a rollercoaster ride, but if you have decades to go before retirement, you have the time to ride out those ups and downs," Hartmann said.

"And over time they have the potential to get much better results, as we saw with those numbers we were running for you before."

When you're weighing up the options the Fund Finder spits out for you, Hartmann has some tips.

While it can be tempting to plump for a familiar brand, such as the bank you use, there are more important criteria.

The fees charged, the services and information offered by the KiwiSaver provider, and the past performance of the fund, are all much more important. And yes, the Sorted machine will give you all of that information, in a relatively simple format.

But the single biggest difference you can make for your future is actively picking a conservative, growth, or aggressive fund. It outweighs all the rest.

So go check your KiwiSaver, nag your friends to check theirs, nag your co-workers, and continue until nobody wants to talk to you anymore. Only then can you consider your duty done on this.

Have a question about this podcast, or suggestions for future topics? I love to hear from you and am easy to track down online. You can find me on Twitter here, and on Facebook here.