Liquidating your KiwiSaver funds

You do not have to leave KiwiSaver when you turn 65.

Sure, on your 65th birthday you are entitled to take out all your money (provided you have been a member for five years), but if you have nothing compelling to do with the money, maybe you should stay with it.

It is true, of course, that from age 65 there are no longer compulsory subsidies.

The Member Tax Credit which Government pays (up to $520 p.a.) stops at age 65 and your employer no longer has to contribute. However, many people continue to work beyond 65. The 2013 Census showed 40 per cent of people aged 65-70 are still in paid employment.

In my experience, many employers continue to make contributions even when the employee turns 65: the employer habits of paying this subsidy are well ingrained and they frequently keep on paying.

In any event, it seems a bit unfair of the employer to cut an employee’s subsidy simply because a worker had a 65th birthday.

If you are still working after age 65, the chances are you do not need the cash from your KiwiSaver. If this is so, you should stay with KiwiSaver, continue to contribute and hope that you employer remains generous. After all, there are few better investments than savings that come with subsidies.

I continue to be surprised at the number of people whose KiwiSaver is for a dedicated purpose: overseas travel, on-going house maintenance, grandchildren’s education etc. I shouldn’t really be surprised. My own KiwiSaver is dedicated to fund my health costs. When I turn 65 I will maintain my KiwiSaver to fund the inevitable medical interventions that I am sure I have to look forward to.

Unless you have a clear idea of what you will do with KiwiSaver withdrawals, you should almost certainly keep your KiwiSaver account going. Remember the following: Once you leave KiwiSaver you will not be able to re-join. You cannot join KiwiSaver if you are 65 or over.

When you are 65, KiwiSaver becomes a liquid investment (you can withdraw funds any time you like). In fact, many KiwiSaver funds allow you to set it up so that you have a regular monthly withdrawal.

Fees are usually lower than other comparable investment funds – KiwiSaver is a very competitive market.

For many people in retirement, continuing with KiwiSaver may be a good investment option. You will need to be sure your provider is good, and perhaps reconsider the level of risk that you have. Nevertheless, continuing with your KiwiSaver account could be a very convenient way to invest at a reasonable cost and provide a better investment solution than bank deposits.

Even if you do need the funds on retirement – perhaps because you want to add to other investments – then you should probably keep the account open by holding a small amount of money in it. Remember that once it has closed, it is shut tight.

Martin Hawes is the Chair of the Summer KiwiSaver Investment Committee. He is an Authorised Financial Adviser and a disclosure statement is available on request and free of charge, or can be found at www.martinhawes.com.

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