Two Weeks Left to Get a 50% Return on Your Kiwisaver Top Up
15 June 2015
Only Two Weeks Left to Get a 50% Return on Your Kiwisaver Top Up
Interest rates may be coming down but to get a 50% return on their contributions, KiwiSaver members may need to top up their accounts over the next two weeks says the Financial Services Council CEO Peter Neilson. Last year KiwiSaver members failed to pick up $400 million in member tax credits.
If you put up to $1042 dollars into your KiwiSaver accounts each year the Government will match each $1 from you with a further 50c contribution from the tax payer. There is nowhere else you can earn a 50% return on your savings, Mr Neilson says. You have until 30 June 2015 to top up your account contribution to $1042 to receive the maximum of $521 from the tax payer. $521 a year may not sound like much but over 45 years and then earning interest on the interest reinvested it could mean over $100,000 more in your retirement nest egg at age 65 (based on $521 each year, from age 20 to 65 and invested in a balanced or growth fund for someone earning $48,000 or less per year).
The FSC estimates that about 460,000 New Zealanders earning less than $35,000 will probably leave money on the table because they have not contributed enough to pick up the full $521. Those on a contribution holiday will similarly miss out on the $521. A KiwiSaver should check their account to see if they have contributed enough to receive the full $521 and if not top it up to the $1042.
If you have a son or daughter working and contributing to KiwiSaver you might think about topping up their account to help them on the way to a first home deposit and a comfortable retirement.
I am going to top up my daughter’s KiwiSaver account as her part time earnings while a full time student won’t see the required $1042 dollars going into her account to pick up the full $521 incentive payment.
If you can’t afford this today, you might think of setting up a regular direct debit to help top up the account over future years. A direct debit of just $20 a week would see the contributions reaching $1042 a year.
With 2.5 million KiwiSavers already enrolled it is the most successful savings innovation in the last century. All KiwiSavers should have 1 June marked in their diary each year to remind them to check their KiwiSaver balance, whether their level of contributions will get them the full $521 tax credit, whether they are in the best investment style for them and if the current tax rate is being applied to their fund. Getting these settings right can mean the difference of $100,000’s more in your retirement nest egg at 65. It pays to keep an eye on your KiwiSaver account to check it is working hard to you.