The reality is stark: KiwiSaver can’t save you from the looming NZ retirement crisis. While many Kiwis assume their KiwiSaver balance will carry them comfortably into retirement, the numbers tell a very different story.
KiwiSaver: The Illusion of Security
KiwiSaver was designed as a safety net, but many Kiwis are treating it like a complete solution. It’s much like when seatbelts were first introduced in cars: people thought they could drive faster and take more risks because they felt “protected.” In the same way, many assume KiwiSaver alone will keep them financially secure in retirement.
But the seatbelt isn’t tight enough. With minimum contributions set at just 3%, New Zealanders are saving far too little compared to other countries. The result? Retirements that will be underfunded and lifestyles that will be dramatically reduced.
The Numbers Behind the NZ Retirement Crisis
The average KiwiSaver balance paints a grim picture. By age 65, many New Zealanders are sitting on balances of around $65,000. That might feel like a decent sum, but spread across decades of retirement, it barely makes a dent.
Even those on stronger paths aren’t faring much better. Take the example of a 40-year-old today with $40,000 in KiwiSaver, earning the median income of $82,000 and contributing 4% with an employer match. Assuming a 3% net real return, their balance at retirement is projected to be just $250,000. For a couple, that’s $500,000 combined – which works out to about $500 a week.
$500 a week isn’t enough to fund a comfortable retirement. While NZ Super might provide a top-up, it’s increasingly unreliable. Treasury has already suggested raising the eligibility age to 72, meaning younger generations may not receive support until much later in life. Relying on the combination of KiwiSaver and superannuation could leave retirees well short of their actual needs.
Contribution Levels: Why We’re Behind
Australia’s superannuation system offers a clear comparison. With compulsory contributions set at 10-12%, Australians not only enjoy stronger retirement savings but also benefit from the economic growth that comes from large super funds investing back into the country.
By contrast, New Zealand’s 3% minimum contribution rate is simply inadequate. Increasing contributions – for both employers and employees – could significantly improve outcomes. Moving gradually from 6% combined contributions up to 10% over several years would help future retirees accumulate an additional $1 million on the average income.
But while raising contributions sounds simple, the current cost of living crisis and business pressures make it a tough political sell. In the meantime, thousands of New Zealanders continue to under-save, pushing the retirement crisis further down the track.
Why KiwiSaver Alone Isn’t Enough
Even if you do everything “right” with KiwiSaver, it won’t be enough by itself. Too many people assume they’ll simply spend less in retirement, but that’s rarely the reality. In fact, many expenses stay the same or even rise. Dropping your income to 20% of what you earned while working is simply not sustainable.
The first step is to make active choices. Too many New Zealanders are still sitting in default funds, or conservative options that don’t align with their goals. The difference between a strong provider and a poor one compounds massively over time, and making no choice is still a choice – usually the wrong one.
Beyond KiwiSaver: The Steps That Really Build Wealth
The podcast highlights a simple but powerful framework for building long-term wealth:
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Sort out your KiwiSaver
Make an active choice on provider, fund type, and contribution level. This alone won’t save you, but it sets a foundation.
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Pay down your mortgage
Extra repayments, holding payments steady when interest rates fall, and creating a budget surplus all help reduce your biggest liability. Once the mortgage is down, you start to free up equity.
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Leverage good debt, avoid bad debt
Your owner-occupier mortgage is “bad debt” that drains resources. Investment property debt, on the other hand, can be “good debt” because it generates returns. The focus should always be on clearing personal mortgage debt quickly, then strategically using equity for growth.
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Diversify into funds, not shares
Once your mortgage is under control, you could start investing in diversified, low-cost funds. Avoid “DIY share picking” – knowing a brand name like Netflix doesn’t mean you understand its fundamentals. A diversified approach spreads risk and builds stability over time.
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Reverse-engineer your financial plan
Work backwards: decide what you want your retirement to look like, then calculate what needs to be saved and invested each year to achieve it. Without a plan, you’re just hoping for the best.
Key Takeaways
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KiwiSaver can’t save you on its own – balances are far too low.
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The average KiwiSaver balance at 65 is around $65,000 – not enough to last decades.
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Even a $500,000 combined balance for a couple only delivers about $500 a week in retirement.
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NZ contribution rates (3%) are far behind Australia’s compulsory 10-12%.
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Superannuation is uncertain, with the eligibility age potentially rising to 72.
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Active KiwiSaver choices make a big difference over time.
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Paying off your mortgage should be a priority before branching into other investments.
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Investment property and diversified funds build long-term resilience.
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Picking individual shares is risky – diversified, low-cost funds are more effective.
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A clear financial plan, reverse-engineered from your goals, is essential for peace of mind.
Next Steps
If you haven’t reviewed your KiwiSaver recently, now’s the time – book a 30-minute session with a Lighthouse KiwiSaver adviser and make sure your fund, provider, and contributions are actually working for your future.
If you’d like to learn more, check out these other episodes below.
For a no obligation discussion to see how we can help you on the path to wealth, please contact us.
Disclaimer:
The information in this article is general information only, is provided free of charge and does not constitute professional advice. We try to keep the information up to date. However, to the fullest extent permitted by law, we disclaim all warranties, express or implied, in relation to this article – including (without limitation) warranties as to accuracy, completeness and fitness for any particular purpose. Please seek independent advice before acting on any information in this article.
