Increasing your Superannuation and/or KiwiSaver

One of the most predictable ways to increase your retirement funds is to increase your contributions to either your super or KiwiSaver or both. As you know, the maximum subsidy for retirement savings from the DHB is 6%. However, any % over the 6% for super can be invested. With KiwiSaver, contribution rates of 6% and 10% are an option from 1st April, in addition to the existing rates of 3%, 4% and 8%.

I have had feedback from several doctors who say that having money deducted from their pay for retirement savings works really well for them because if it ends up in their bank account there are multiple ways to spend it. I appreciate that many of you are focussed on paying down mortgage debt, which is a sound thing to do, however, if you are comfortably doing this and find you have surplus funds, I would encourage you to increase your superannuation / KiwiSaver contributions. Drip-feeding investments allows you to average your way into markets, which takes any guesswork out of timing issues. Additional savings have a big impact over time. By way of example, if you increased your contributions by 4% to a total of 10% starting at age 35 it would accumulate to $1,229,257 at age 65, versus an accumulation of $878,054 at 65 if you keep your contributions at 6%. This accumulation of $878,054 is 40% lower. The assumptions here are that the individual is earning a gross salary of $200,000 and the DHB are also contributing a net 4% (6% less super tax). The interest rate is a real (net of fees, tax and inflation) return of 2.5%.

In addition to increasing regular contributions, lump sums can be added at any time.

Note that with KiwiSaver, funds (aside from the first home deposit option) are locked into the age of eligibility for NZ super which is currently 65. Super funds are typically locked in to age 55.