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As Silicon Valley Banks in the US wobble and tumble, our KiwiSaver balances will take a dip. Do not panic. Stay the course and use this as a timely reminder to get aligned.
Get aligned, you say? As in – a spinal alignment, or my wheels?
Well kind of, but in a financial sense. Just as important as it is to have good health and regular check-ups, so it is to check up on your financial health, and that your investments are aligned to your goals. And today, specifically, I am referring to your KiwiSaver.
I cannot help you in the slightest if your car wheels are out of alignment – the best I could do is guess wheel alignment is an issue if your car keeps wanting to drive you into a ditch. That is all I have, when it comes to your car. Same goes with your spine, your hips and your knees.
But when it comes to your KiwiSaver.. let’s talk! I am all over this.
I am surprised by the number of people whose KiwiSaver is out of alignment and they are running into metaphorical ditches. Many have no idea. No big deal I hear your say, but au contraire Dear Reader, I would argue the counter, it is a big deal.
If your KiwiSaver settings are not correct you could lose out on hundreds of thousands of dollars, and that is the difference between a comfortable retirement and a struggling one. Your KiwiSaver balance is likely to be one of your biggest assets.
There are some areas we need to ensure are aligned. Let me give you a sample of these.
Too many people we talk to still have their KiwiSaver with their default provider or have put it with their bank, so “everything is in the same place”. I would argue that unless there is a compelling reason why you have kept these settings, there are things we can adjust to improve your investment.
One of the first things we check is if you are aligned to a KiwiSaver provider who has a track record of performing (i.e., a better than average after-fees return over many years.)
Not all KiwiSaver providers are created equal. You will not always be with the top performer, as no one company will always be the top performer. But let us make sure you are with a company who has a good track record of performing. Don’t get hung up on the fees (we can talk more about this if you wish) because returns are measured AFTER fees, so focus on the returns piece instead.
Another thing we will discuss is your goals for your KiwiSaver and how quickly you need to get there. For example - Is your level of contribution to your KiwiSaver aligned to your current budget, and your savings goal - be that your first home, or retirement?
Depending on how quickly you need the money out, and how much your budget is, is 3% the right level, or should this be 4, or 6, or 10%. Let’s talk about this.
Checking your tax rate is a pretty simple check, but it needs to be right to make sure you are paying the right amount of tax on your KiwiSaver returns.
We will ask you a few simple questions to make sure this is set up right for you.
If you don’t want to be supporting companies that sell tobacco, nuclear power, fossil fuels, adult entertainment, or whatever, we need to make sure your fund doesn’t support that either. (Although it may sound almost impossible to know this, we have some pretty simple comparative tools to ensure alignment. Here is an example )
The win for you, we can align your KiwiSaver for you, and we will not charge for this service. The win for us; not only are we confident we have chosen KiwiSaver providers to partner with that will allow all of the above to be covered off, but they pay us so we can continue to provide an ongoing service to you. In fact, this commission not only allows us to advise you but the provider (and the legislation we operate under as financial advisers) insist that we do. Does this cost me, I hear you ask? Answer, our fee is taken out of the standard fee you pay your KiwiSaver provider - refer back to the point of looking at good long term returns AFTER fees)
What a week this would be…
Car in for a service and wheel alignment… check.
Making the chiropractic /physio appointment … check.
KiwiSaver check up with my Velocity financial Adviser … check.
If you have read this far, you will know I cannot help with the tyres or the back, but let’s book you in for the KiwiSaver!
Brendon.
Brendon Ojala (FSP119244) is a Financial Adviser with Velocity Financial (FSP95466). No investment decision should be taken based on the information in this blog alone. Please see Brendon’s disclosure statement on our website.
About Brendon:
Hi, I'm Brendon, one of the owners and advisers at Velocity Financial. I have been giving advice on mortgages and insurances at Velocity for around 15 years, and it is great to be able to work with people to achieve their financial goals. Prior to giving money advice I worked as a youth worker and managed teams for a not-for-profit organisation. I live with my wife and one of my sons (the other one only stays when he needs food) in Berhampore, and if I'm not talking revolving credit accounts, I can be found running the trails of Wellington.