Once you turn 65, congratulations! You are now eligible for NZ Super and have access to your KiwiSaver account.
At National Capital, we talk a lot about planning your retirement and sorting out your KiwiSaver investment. But what happens to your KiwiSaver account once you hit 65? Do you have to withdraw your entire retirement lump sum? No – you could make partial withdrawals, set up regular withdrawals or even continue contributing to your KiwiSaver account.
Government Contributions after 65
In most cases, the government will stop contributing to your KiwiSaver account once you turn 65. However, even without the Government’s contribution, there are many advantages to remaining in KiwiSaver. Many of our retired clients use KiwiSaver as a safe investment vehicle to give them regular income in retirement. We create a bucketing strategy for such clients by which we can ensure they get the maximum returns from their KiwiSaver money while still ensuring its safely invested. You can get free recommendations for a bucketing strategy for yourself by completing our KiwiSaver HealthCheck.
Click here to submit the KiwiSaver HealthCheck.
If You Joined KiwiSaver in Your 60’s
The short answer is you’re eligible to withdraw all your KiwiSaver funds when you reach the age of eligibility (currently 65).
As per the old regulations, If you joined KiwiSaver before 1 July 2019 and were aged between 60-64 you would have been locked into KiwiSaver for 5 years. Being locked in meant you could not withdraw your funds when you were 65. However, from 1 April 2020 you can now either:
- opt out anytime after you’re 65 (and withdraw your savings)
- keep your funds in KiwiSaver for the full 5 year term (and withdraw them after that).
You can get the government contribution if you joined KiwiSaver:
- before 1 July 2019 and have been a member for less than 5 years
- after 1 July 2019 and are under 65.
Process of Withdrawing your KiwiSaver Funds
If you’ve decided to withdraw your KiwiSaver balance, you’ll need to contact your KiwiSaver provider and complete their withdrawal form along with a statutory declaration. Once you have completed the withdrawal form and signed the requirements, you can look forward to receiving the funds in your New Zealand bank account. The time it takes to process your withdrawal depends on your provider and how much of your funds you plan to withdraw.
When you take out money, it won’t be taxed. This is because you have already paid KiwiSaver tax on your investment returns. The amount you withdraw also does not affect how much NZ Super you receive.
One time Withdrawals
If you are making a partial withdrawal, for things like a new car, or home renovations, depending on your provider, it may take up to a week for you to receive your funds. If you are making a full withdrawal, this may take your provider 2-3 weeks to process. Some providers may close your KiwiSaver account if you withdraw all of your funds, and some may not let you join their KiwiSaver scheme again. As your KiwiSaver investment can now act as a low-cost, flexible investment option, make sure you consider what your financial needs will be throughout your retirement before making these lump-sum withdrawals.
Regular Withdrawals
You can also set up regular withdrawals which can act as income streams throughout your retirement. Automatic weekly, fortnightly, or monthly withdrawals are an effective way to handle your lump sum throughout retirement. You will, however, need to consider what activities you will be doing in retirement and how much money you’ll want going into your bank account. Your expenses on activities like travel and leisure activities could be higher in your first years of retirement while medical and healthcare expenses may increase in later years.
Contributions to Your KiwiSaver Account After 65
Most providers will let you continue to contribute your savings or make lump sum contributions after 65. As there is no official retirement age in New Zealand, many New Zealanders continue to work past 65. If you are still working, you will automatically still be making employee contributions unless you request to opt out (by filling out a KS51 form).
If you continue to work after you turn 65, employers are not legally obligated to make contributions, meaning you may not get these. You will also stop receiving the government member tax credits. There are exceptions to this if you joined KiwiSaver in your 60’s.
What Should I Do?
Everyone’s retirement goals and situations are different. With the current life expectancy of New Zealanders being 86 for men and 88 for women, we can expect Kiwis to have around 21 to 23 years to spend their KiwiSaver savings. As your KiwiSaver lump sum is part of your retirement income, you may want to think about how you’ll handle these funds effectively throughout the different stages of your retirement. How do you want to spend your retirement?
At National Capital, our Authorised Financial Advisors take into account your current circumstances and your future financial goals when giving you recommendations. Feel free to contact us if you have any KiwiSaver related questions – we’re happy to help!