Often, when we talk about KiwiSaver, we focus on the accumulation side of the story. But what happens when you start to think about taking money out?
Here is a rundown of how withdrawals from KiwiSaver can work.
When can you withdraw money from KiwiSaver?
KiwiSaver has some clear rules about when money can be withdrawn.
Savers can access their accounts in these situations:
First-home withdrawal: If you’ve never owned a property before, or are in the same financial situation as a first-home buyer, you can usually access your KiwiSaver savings to help with a deposit.
Usually, you’ll approach your KiwiSaver provider in the first instance to apply, often with a statutory declaration, withdrawal application form and letter from your lawyer. It often takes about two weeks for a KiwiSaver provider to process an application and the money is then paid to your lawyer who will forward it to the vendor on settlement day.
If you’ve previously owned a house but are now deemed to be in a first-home buyer’s position, you’ll need a letter from Kainga Ora confirming this.
Financial hardship: If you’re in a situation where you are not able to meet your minimum living expenses, or need to cover the costs of something like medical treatment or a funeral, you may be able to apply to withdraw money from KiwiSaver. In these situations, the KiwiSaver scheme’s supervisor decides how much an investor can withdraw.
People are often advised to check they don’t have other options before turning to their KiwiSaver in this situation, because the withdrawal can make a big difference to their final savings outcome.
As Sorted notes, a $20,000 withdrawal by a 35-year-old with $22,000 in a growth fund could mean they end up with $74,000 less at retirement, when adjusted for inflation.
Reaching 65: You can access your KiwiSaver account without restriction when you reach 65.
You can also access your money if you are moving overseas (but not to Australia) permanently.
At 65
When you reach 65, you can choose to withdraw from KiwiSaver. But you don’t have to.
You can withdraw just part of your balance, or choose to draw it down in a staggered process.
You can also opt to leave the money there. While you might have been saving “for retirement”, you could be in retirement for several decades. To make your money last, you may need to continue to have some investments with exposure to some growth assets, and KiwiSaver can be the way to do that.
You can also choose to keep contributing to the scheme although you may not get contributions from your employer and will not receive them from the Government.
Advice can be a big help at this point in life to help you determine what the correct settings might be for your investment funds. You might start out with settings that are very similar to how they were pre-65, then gradually lower your risk exposure as you go along.
Want to talk?
If you’d like to talk about KiwiSaver, and accessing your money, drop us a line. We’d be happy to discuss your options with you and help you to work out what might be appropriate for your circumstances.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.
