Should you use your KiwiSaver to buy a house?
It's generally recommended that you keep your KiwiSaver funds invested until you reach retirement age, which is currently set at 65 in New Zealand. This is because KiwiSaver is designed to be a long-term savings and investment vehicle to help you save for retirement.
When you contribute to KiwiSaver, your contributions are invested in a range of assets, such as shares, bonds, and property, with the aim of growing your money over the long-term. Over time, the compounding effect of your investments can help your savings to grow significantly, which can help to provide you with a comfortable retirement income.
The longer you keep your KiwiSaver funds invested, the more time they have to grow, and the more you're likely to have saved for retirement. However, this doesn't mean that you should leave all your KiwiSaver funds invested in a high-risk investment portfolio. As you approach retirement age, it's a good idea to gradually shift your KiwiSaver funds to more conservative investments that are less likely to fluctuate in value.
It's important to note that while the retirement age is currently set at 65 in New Zealand, you can choose to access your KiwiSaver funds as early as age 60, as long as you've been a member of KiwiSaver for at least five years. However, if you choose to withdraw your funds early, your retirement savings may not last as long, so it's important to consider this carefully before making any decisions.
Using your KiwiSaver funds to buy a house can impact your retirement savings in a few ways.
Firstly, withdrawing money from your KiwiSaver account to buy a house means that you will have less money invested in your KiwiSaver account, which may result in a smaller retirement savings pot. This is because the money that you withdraw to purchase a house is no longer invested and earning returns, which can mean missing out on potential growth.
Secondly, withdrawing your KiwiSaver funds to buy a house means that you will not be contributing to your retirement savings during the period in which you are saving for a house deposit. This can also have an impact on the overall size of your retirement savings.
Finally, using your KiwiSaver to purchase a house can also impact your retirement savings if it means that you have to take on a larger mortgage. This can mean that you have less money available to contribute to your KiwiSaver account in the future, which can further impact your retirement savings.
It's important to note that using your KiwiSaver funds to purchase a house can have a number of benefits, including:
First Home Grant: Eligible first home buyers can apply for the First Home Grant, which is a grant of up to $5,000 from the government to put towards the purchase of their first home. This grant is designed to help first home buyers get onto the property ladder and can be used in conjunction with KiwiSaver.
First Home Withdrawal: Eligible KiwiSaver members who are buying their first home can also apply to make a First Home Withdrawal. This allows them to withdraw their KiwiSaver savings, including their contributions and any employer contributions, as well as any government contributions, to put towards the purchase of their first home.
Faster Deposit Savings: By contributing to KiwiSaver, you may be able to save for a home deposit faster than if you were saving outside of KiwiSaver, due to employer contributions and the potential investment returns on your savings.
Reduced Mortgage: By using your KiwiSaver savings towards your home deposit, you may be able to reduce the amount you need to borrow from the bank. This can mean that you have a lower mortgage repayment and potentially save on interest costs.
Potential Investment in Property: By purchasing a property, you are making an investment in a physical asset that has the potential to increase in value over time. This can provide an additional source of wealth and potential income in the future.
In conclusion, KiwiSaver can be a useful savings and investment tool for both retirement and buying a house. While there are benefits to using KiwiSaver to purchase a house, such as the First Home Grant and First Home Withdrawal, it's important to carefully consider the impact on your retirement savings before making a decision. Withdrawing funds from your KiwiSaver account for a house deposit can mean that you have less money invested for retirement and may not be contributing to your retirement savings during the period in which you are saving for a house deposit. However, using your KiwiSaver to purchase a house can also help you get onto the property ladder earlier and potentially save on rent costs, while reducing the amount you need to borrow from the bank.
Ultimately, the decision to use KiwiSaver for retirement or buying a house will depend on your individual circumstances, financial goals and timeline. It's important to weigh the potential benefits and drawbacks, and to seek professional advice before making any decisions. By carefully considering all the factors involved, you can make an informed decision that is best suited to your unique situation.
Talk to your financial adviser!
