If you are self-employed and living in New Zealand, you might think KiwiSaver isn’t worth your time since you don’t receive employer contributions.
However, opting out of KiwiSaver could mean missing out on significant financial benefits that could secure your first home and your future retirement.
Free money!
Even without an employer, you’re still eligible for the government contribution of up to $521.43 every year. That’s essentially free money for your retirement fund which will accrue compound interest over the long term. To get the full amount, you need to contribute $1,042.86 per year – that’s about $20 per week. That’s a 50% guaranteed return on your investment. Unheard of!
Buying your first home
Being self-employed doesn’t exclude you from KiwiSaver’s first home benefits. As with all first home withdrawals, you must be in KiwiSaver for at least three years before you withdraw funds.
You can still withdraw most of your KiwiSaver funds for your first home purchase. This includes any contributions you have made, the government contribution, and any returns you have earned. Funds transferred from an Australian Super scheme cannot be withdrawn and you must leave $1,000 in your account.
Disciplined saving for retirement
While it might be tempting to focus solely on your business, remember that retirement planning is crucial for self-employed individuals who don’t have the safety net of employer-sponsored retirement benefits.
It is risky to be solely investing in your business for your future. By having a separate investment for retirement, you are diversifying your money. Your KiwiSaver will also be managed by a professional group of investment specialists.
Flexibility for the self-employed
KiwiSaver actually offers good flexibility for self-employed individuals, you can choose your contribution amount, how often it’s paid, and these can be adjusted if absolutely necessary. Something to keep in mind is that if you are self-employed and pay yourself through PAYE, you will have to contribute 3% as the employee and 3% as the employer, so a total of 6%.
How to Get Started
These great benefits make KiwiSaver a valuable tool in your financial planning toolkit. Give us a call at Cole Murray. We have a team of Wealth Advisers who specialise in KiwiSaver.
They can help you choose a KiwiSaver provider that aligns with your investment goals. They can help get you set up to put regular contributions into your account. They will ensure you are contributing enough to get the full government contribution every year. Lastly, they will regularly review and adjust your contribution strategy as your business grows.
