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You should put as much as possible into KiwiSaver, right? Not always.

So you’ve heard time and time again that you need to save for retirement, that you need to start now (or yesterday!), and possibly that you need to be putting away as much as possible. Of course, growing a nest egg and preparing for retirement is extremely important but it’s also important to ensure we’re well covered for other aspects of our life.

Retirement planning is a balance act of putting money aside for later, while keeping enough readily available to cover us for now and in the shorter term. Wait too long to start saving and you’ll have to play catch-up later. Save too much now and you may be neglecting other parts of your financial plans (plans which might even help set you up for retirement further).

First things first

If you are not a KiwiSaver member already, this is the first step. The fact is, KiwiSaver means free money – you contribute a percentage of your income, but your employer and the government both contribute too. Plus, if you contribute enough, you also get $521 each year through Member Tax Credit (click here to find out more). Combine all this with well invested funds and compound interest, and you’re on your way to a comfortable retirement.

Now let’s look at your retirement plans

To reap the rewards of KiwiSaver, it might make sense to contribute as much as possible until retirement. But before you do, ask yourself these questions:

  • Do you have any high-interest credit card debt? If so, pay that off ASAP
  • Do you have life and income protection insurance?
  • Do you have an emergency fund? Many recommend 3-6 months of living expenses.
  • Do you have adequate medical insurance?

If you don’t have appropriate levels of cover you could be putting yourself and your loved ones at risk. If the unexpected happens without cover, the financial setbacks could be massive, and compromise your ability to earn and save for retirement.

Consider all your options

KiwiSaver is there to help you set yourself up for retirement, and it’s already proving it’s worth. But investing all our spare cash in KiwiSaver is not always the best option. Sometimes we need to access our savings prior to retirement, it’s important to maximise your flexibility and ensure you’re well covered should something go wrong.

If you want to understand your situation better and what might be best for you, get in touch to arrange a chat with an advisor.