A lot of the time, when people talk about KiwiSaver, they think about it from an employee’s perspective. They’ll mention things like the benefits of having your employer contribute to your savings goals, or how much of a contribution your employer might match.
But what if you’re self-employed and you don’t have an employer helping you along in that way?
There are still lots of benefits to being in a KiwiSaver plan if you work for yourself, but there may need to be some small changes in the way you think about the scheme. Read on to learn more.
Your contributions
When you’re thinking about how much to put into your KiwiSaver scheme as a self-employed person, you will probably approach it in a different way to someone who is an employee.
How it will work will depend a bit on how you pay yourself.
If you take drawings, and not a salary, you will need to make voluntary contributions to your KiwiSaver scheme. These can be as much as you like and paid as frequently or infrequently as suits you, but it usually makes sense to at least put $1,042.86 a year into your KiwiSaver plan so that you can get the maximum government credit, of $521.43. This works out to roughly $20 a week in contributions.
If you pay yourself a salary, you can choose to automate a contribution to your KiwiSaver plan as part of that. That contribution can be at 3 per cent, 4, per cent, 6 per cent, 8 per cent or 10 per cent of your salary.
We can help you work out the most appropriate way to make contributions, and what a suitable amount might be.
Extra savings
Obviously, $20 a week won’t get you to a huge retirement nest egg, even with the government contribution on top, so you may not be able to rely on that $1042 as your retirement savings plan.
You’ll probably need to save more but whether you want to put the extra into your KiwiSaver account or keep it somewhere else is something you’ll need to think about, and which we can offer you advice on.
KiwiSaver can be a good option because it’s simple, relatively low-cost and the money is tied up until you turn 65, which removes the temptation to tap into it if things get tight.
First-home benefits
Looking at buying your first home? When you’re in a KiwiSaver plan, whether as an employee or self-employed, you can take advantage of benefits when it comes time to buy a home.
People who have been a member of KiwiSaver for at least three years can withdraw from their account to fund a home, provided they leave $1,000.
You may also qualify for additional assistance such as the First Home Loan or First Home Grant, provided you meet income criteria and are buying below your area’s price caps. Like to know more? Get in touch: we can help you determine what a KiwiSaver first-home withdrawal may mean for your retirement savings.
Other options
When it comes to saving for retirement, of course, KiwiSaver is just one of the tools available.
If you’re running your own business, you might need to invest in that from time to time as part of your wealth building plans, and you may want a savings option that gives you more flexibility to access your money to do so.
That could be a managed fund that is outside the KiwiSaver universe, or other direct investment options such as shares, bonds, fixed interest or even property. We can help you determine an investment strategy that works for you and your business plans.
What if you stopped being self-employed?
If you eventually go to work for someone else, you can continue to use your KiwiSaver plan for your retirement savings goals. You’ll just need to let your new employer know that you’re in a KiwiSaver plan and choose the contribution amount you’d like to make.
Check regularly
When you’re caught up in running your business, it can be easy to let general life admin, like retirement savings, slip down your priority list.
Make sure you regularly check in on your savings and how they are growing, whether you’re on track to your goals and what changes might need to be made. When you’re building up an asset in the business you own, as advisers we can help you take a holistic view of your financial life and how all the pieces fit together. We’ll review your plans regularly to ensure you are on track.
We’re here to help
Whether you’re self-employed or not, as financial advisers we can help you work out the best way to get on track for retirement. We will help you set goals that are a good fit for your lifestyle and circumstances, and provide assistance along the way to make sure you get there. Get in touch with us today.
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.