Have you recently used your KiwiSaver to purchase your first home? Perhaps you prudently moved your KiwiSaver to a balanced or conservative fund before withdrawal to minimise market volatility. But what happens after settlement day? For many Kiwis, KiwiSaver becomes a forgotten investment, potentially costing them hundreds of thousands of dollars in retirement savings.
The Forgotten Investment
Once you’ve purchased your first home, life changes dramatically. You now have a significant asset, potentially with substantial debt against it. The mortgage becomes your primary financial focus, and KiwiSaver often fades into the background. Now you have a big house with this big mortgage, and that’s what you’re focusing on. And KiwiSaver moves into the background.
This oversight is remarkably common. Many homeowners who used their KiwiSaver for a deposit years ago haven’t reassessed their fund type since. Take, for example, a client whose brother used his KiwiSaver over seven years ago to purchase his first home. His KiwiSaver remains in a conservative fund today, not because of a conscious decision, but simply because he forgot about it and was focusing on his mortgage.
This scenario isn’t unusual. Another individual I spoke with had purchased their home a decade ago using KiwiSaver. As a self-employed freelancer, they hadn’t contributed to their KiwiSaver since, assuming it wasn’t relevant to them. These stories highlight a crucial gap in understanding – many don’t realise that KiwiSaver continues to be a valuable investment tool long after it’s been used for a home deposit.
Even those who are aware of their KiwiSaver often leave it in the same fund it was in at the time of home purchase. This could mean missing out on significant growth potential, especially if it was moved to a conservative fund to protect it before the withdrawal for the home deposit.
The key issue here is that life’s major milestones – such as buying a home – can overshadow the ongoing importance of retirement planning. The excitement and financial focus of homeownership can make it easy to overlook the need to reassess and potentially adjust your KiwiSaver strategy for long-term growth.
Understanding Your Time Horizon
The critical factor many overlook is your time horizon. KiwiSaver has two major milestones: first home purchase and retirement. After using it for your home, the next access point is typically age 65.
Generally, KiwiSaver is locked in until age 65, unless you experience significant hardship or other factors, which means your time horizon to access KiwiSaver is a very long time.
If you purchased your home at 30, you have 35 years until you can access your KiwiSaver again. This extended timeframe means you can weather market volatility and potentially benefit from higher returns associated with growth-oriented funds.
Fund Types and Their Impact
KiwiSaver funds typically fall into these categories:
- Defensive: Majority or all funds in cash and bonds (lowest risk)
- Conservative: Some allocation to shares, majority in cash and bonds
- Balanced: Roughly 50/50 mix between shares and bonds
- Growth: Majority in shares with some bonds
- Aggressive: Almost entirely shares with minimal bonds or cash (highest risk)
The financial impact of your fund choice is substantial.
Consider this example: A 30-year-old earning $70,000 annually (the median NZ salary), initially contributing 3% (but increasing in line with the recent budget changes), with a zero balance after home purchase, could have:
- $200,000 at retirement in a defensive fund
- $234,000 in a conservative fund
- $276,000 in a balanced fund
- $328,000 in a growth fund
- $392,000 in an aggressive fund
That’s a difference of $192,000 between the lowest and highest risk options – nearly double the retirement savings!*
The Retirement Reality
According to Massey University’s New Zealand Retirement Expenditure Guidelines (January 2025), a couple living in a metropolitan area on a “Choices” budget – not extravagant but comfortable enough to have options – needs approximately $1,740 per week or $90,000 annually.
NZ Superannuation currently provides about $40,800 annually for a couple (at 17.5% tax rate), leaving a shortfall of nearly $50,000 per year to fund that comfortable retirement.
The $192,000 difference between fund types could fund nearly four additional years of comfortable retirement for a couple. For many Kiwis, that’s the difference between financial stress and peace of mind in their later years.
Taking Action
If you’ve used your KiwiSaver for a home purchase, now is the time to reassess:
- Check your current fund type: Log in to your KiwiSaver provider or contact them directly
- Assess your time horizon: How many years until you turn 65?
- Consider your risk tolerance: Can you sleep at night during market volatility?
- Use available tools: Visit sorted.org.nz to use their fund finder, KiwiSaver and retirement calculators
- Review fees: Are you paying high fees without receiving advice or additional services?
Remember that while “aggressive” funds sound risky, with a long time horizon, they’re often the most appropriate choice for maximising retirement savings. The negative connotations of terms like “aggressive” and “risk” can lead people to make overly conservative choices, which can have significant long-term costs.
Your KiwiSaver, Your Future
Your KiwiSaver exists to help you save for retirement. After using it for your first home, it’s easy to forget about it, but that oversight could cost you a lot with your future retirement savings.
Take 15 minutes today to review your KiwiSaver settings. It might be the most profitable time you will ever spend.
