How A 40 Year Old Turns KiwiSaver Into A Real Retirement Plan

You can change your retirement track with moves so small you might not even feel them in your weekly budget. We sit down with Dave and walk through a real KiwiSaver case study for a 40-year-old earning $75,000, contributing 4% (with a matching employer contribution), and holding a $30,000 balance, all with one clear goal: retire at 65 on the same income. 

From there, we get specific about what actually shifts the numbers. We compare a balanced fund with an aggressive fund and talk about why “the right fund” depends on timeframe, risk tolerance, and what you’re trying to achieve. Then we look at lifting contributions from 4% to 6% and translate it into real life cost, around $28 a week, while showing how compounding can turn those small habits into a much stronger retirement income and a bigger lump sum over time. If you care about KiwiSaver returns, retirement planning in New Zealand, and practical steps that are easy to action, this is a grounded place to start. 

We also tackle the reasons people avoid financial advice, including the belief that you need to be wealthy before you can ask for help, and the Kiwi tendency to chat about the OCR at barbecues while staying silent about our own finances. We share how to have better “kitchen table” conversations, and why chasing a mate’s performance story can lead you into a fund that clashes with your goals or ethics, including socially responsible investing. If this helped, subscribe, share it with a friend who needs a nudge, and leave a review with the one KiwiSaver change you’re considering next.

Transcript

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Welcome Back And The Big Idea

SPEAKER_01 0:10

Quite some time ago, we talked about how the Kiwi Saver numbers look like, how they stack up. I've got Dave back in the house today, and we're gonna look into a particular case study with the Kiwi Saver. So tune in and hopefully if you're driving, you know, concentrate on your driving. But if you're not driving, you could even pull up pen and paper and just take some facts down. Hello, Dave.

SPEAKER_00 0:30

Morning. How are you again? I'm back. You're back. I'm back.

SPEAKER_01 0:35

Good to see you. Right. Me too. You went away, you did some numbers. Yeah.

SPEAKER_00 0:39

So I thought it's it's important to see what a difference can make by receiving good advice and changing what you're doing and maybe changing your habits a little bit to help you get to where you want to be. Excuse me. So I thought I'd run you through a little scenario so that you can see by doing little things and what it costs to do those little things and show you the difference it can make. Alright, so do you want me to crack on? Crack on. Alright, so just a few assumptions we're going to make here to set the scene. So we're talking about a 40-year-old, a uh somebody that's

Setting The KiwiSaver Case Study

SPEAKER_00 1:15

earning $75,000 a year. So put that into perspective if you're earning a little more or a little less. They're they're contributing 4% of their salary, and their employer is doing the same. They've got a $30,000 balance in KiwiSaver at the moment. Interestingly, the average KiwiSaver balance at the moment is just over 40 now, which is great to see. And they want to retire at 65, but they want to retire on the same income. So we're looking at a net salary once they've received their $75,000. Okay. So this is what they've told their advisor. So what are the differences that she needed to make? Currently, she was in a balanced fund. So we looked at moving her to an aggressive fund. She was going to move her employee uh contribution, so her own contribution

Balanced Versus Aggressive Fund Shift

SPEAKER_00 2:02

from four to six percent. We'll talk about that in a minute. What that created was an annual income at retirement moving it from $39,000 a year, which was under her current salary, to $54,000 a year, which was just a little bit over her current salary. So just making those little changes can make a big difference in what you're trying to achieve when you retire. It made a lump sum difference from $325,000 at the at $65,000 to $559,000. That's huge. It's big, isn't it? And it's just a few little changes. A, making sure you're in the right fund to fit your needs. So moving from a balanced to a more aggressive fund makes a big difference, of course. And thinking about what are you contributing to get you there? But what's your goal? And that's where sitting down with an advisor can really help. That 2% extra Kiwi saver she's putting in is that an extra $28 a week.

SPEAKER_01 3:01

I was about to ask, how does it hurt? How much does it hurt financially?

SPEAKER_00 3:05

Correct. So on what I've written here as well is two lunches that you might buy during the week, $28 a week, to get you a lot more comfortable retirement is probably worth looking at. And you know what? If if you're in Auckland, it's probably only one lunch, but I was about to say it's probably only two coffees.

SPEAKER_01 3:22

Yeah, exactly. Or three coffees in Wellington.

SPEAKER_00 3:24

So it's it's it's putting it into that monetary view to go, oh yeah, okay, but your life's tough. And then you go, well, you don't see this coming out because it goes straight from your salary into your Kiwi Saver. So it's you've once you get used to it and get those habits formed that you don't need that $28 a week anymore, you don't see it. It's just helping build your your wealth for when you retire. And we need to really take our retirement a lot more serious. One of the things I also wanted to point out, because that's talking to somebody and sitting down and going, right,

What The Extra 2% Really Costs

SPEAKER_00 3:56

talk to them about your goal. Because a lot of people don't know. So, well, okay, I want to earn the equivalent of $75,000 a year, or I might want to earn the equivalent of $100,000 a year. Then you need to figure out how you're going to get there. And that's where an advisor will sit down with you and go, Well, you need to contribute this much. You will definitely need to move if you're not in a more aggressive fund at this point. You probably need to move into something like that to fit what you're trying to achieve. There's some interesting stats here, which I've brought down. But there is advice-wise, people there is 23% of people

Why Kiwis Avoid Financial Advice

SPEAKER_00 4:33

that receive financial advice.

SPEAKER_01 4:35

Wait, 27.

SPEAKER_00 4:36

23% of people in New Zealand. And that's not including the the anybody under the age of 18.

SPEAKER_01 4:42

What happened to the others?

SPEAKER_00 4:43

So the the the other bits of advice that have come out of that is, and I've just got it here. I don't know, it didn't write for some reason it didn't write down. There we go. 35% of Kiwis would consider it financial advice. So there's there's a there's a bit of a disparity there of people going, actually, we'll consider it. So my question is, well, why haven't you done it? You know, and a lot of people, and this is why people haven't done it, 63% of Kiwis feel that they are not wealthy enough to receive advice. Now, what I would say to that is don't think about it that way. Think about it and how wealthy you want to be when you retire, or what your goals might be, and build up to that. Financial advisors don't pick and choose and go, Well, I won't deal with you because you haven't got this much and I won't do that. They want to help you get to your retirement, and they will have a client for life along the way as well. So that's that's the benefit of for the advisor sitting down with you and talking to you about your Kiwi server. And a lot of the time, KiwiSaver advice can be at no cost to the client. So sometimes they think, Oh my god, it's going to cost me too much. I I can't afford to go to a financial advisor. Well, go and talk to them, and they may be able to get that for free anyway. And you might might not cost you anything, or it might just cost you a small part. My my advice around that is to you can see the difference it can make by receiving good advice. It doesn't matter what balance you've got, have a plan and talk to somebody. Their visors will talk to you, and let's close that gap a little bit and make sure all Kiwis are getting helped.

SPEAKER_01 6:16

I love that. I absolutely love that because I really think that you're right, there's a lot of people thinking, well, I don't have enough money, I don't have anything to invest. They don't see Kiwi Saver as an investment product.

SPEAKER_00 6:27

Yep, correct.

SPEAKER_01 6:28

All they look is their bank account and they're going, Well, I only have 500 bucks in that.

SPEAKER_00 6:32

Yeah.

SPEAKER_01 6:32

Because there was also some weird statistics around that how many New Zealanders actually have enough savings to get them through three months, six months. Yep. And it's a shocking number that a lot of us are very, very poor. Yeah. We don't have enough savings to see us through emergencies.

SPEAKER_00 6:46

Yeah, I agree. And I and we don't start taking retirement seriously until not so much as it's too late, but until you're starting to go, oh my God, I need to think about this now. Yeah. So I think we need to close that gap. We need to get people talking and and such as yourself out there trying to help people holistically with with their finances. You've got people that that are experts that can help that you can put them in front of. So just ask, you know, yourself when when your clients are talking to you, just ask, and you know, who can I talk to?

SPEAKER_01 7:16

Yeah.

SPEAKER_00 7:17

And if you can't, then you'll I mean I know for a fact that you've got people that can help.

SPEAKER_01 7:21

So I also think, do you think there's a big shame in talking about money in New Zealand? I like at at the barbecues, everyone will be talking about the interest rates and the economy and the OCR.

SPEAKER_00 7:31

Yeah.

SPEAKER_01 7:32

But when it comes to their own finances, do people actually talk about it?

Money Talk Culture And Family Silence

SPEAKER_00 7:36

I I think you're right. I don't know if it's a shame thing. I think it might just be that we're quite a I won't say reserved, but we're quite a laid-back nation where that's the sort of thing where we go, oh no, no, people don't want to know about that, and people don't want to talk about that. I don't talk about that with my friends. I struggle talking about it with my mum and dad, who need that help because they're in retirement and they're worried about it lasting, but they won't talk down with their kids about actually this is where we're at, this is where what we're thinking, and this is where we, you know, and and it could be that me and my sister could help in some way, but I think we have this mentality that it's a private thing between ourselves and our partners. We need to be more open for sure, talk to our parents, but also talk to our kids more. Uh, luckily, my son's in the financial services industry, so we do talk, but it's only because we understand the industry. But I think we need to do it more for sure.

SPEAKER_01 8:29

Because I feel like those conversations can be quite powerful.

SPEAKER_00 8:32

Oh, absolutely.

SPEAKER_01 8:32

The kitchen table conversations, you know, where you sit down, you're having a cup of coffee, and going, hey, I've noticed that, you know, my Kiwi server has grown, my kiwi server has dipped, or you know, I've recently discovered this or that.

SPEAKER_00 8:44

Yeah.

SPEAKER_01 8:44

I think sharing is caring.

SPEAKER_00 8:46

Yeah. Yeah.

SPEAKER_01 8:48

And I think it will definitely lift that financial literacy.

SPEAKER_00 8:51

I think so, but I I think there's ways to do it though as well. Let's uh I've and I think I've mentioned this prior in a in a another podcast, the beautiful New Zealand barbecue chat. Right? The extent of the conversation goes

Barbecue Tips Versus Personal Advice

SPEAKER_00 9:03

to, oh, I'm getting this much from my kiwisover, or I'm getting this much from my investment. You should do it. You should jump on this. What I would say to that is take a breath and go and talk to somebody in the industry or some advisor and go, hey, this is what my friends have said, instead of jumping, because it's very personalized financial advice and it's all about the goal. What are your what are your ethics? How do you want to invest? What do you what what's important to you as an individual when you're choosing a provider or fund? And it's very different to what your next door neighbour's thinking, and they might have a different view on risk, and they might have a different view on socially responsible investment, you know. So I th it's really important not to get too carried away by somebody telling you that their Kiwi Saver's earned 25% the year before it could have earned minus two, you know. So you it's it's it's just take a breath if somebody does say that.

SPEAKER_01 9:54

I think it's stages and ages as well. Yeah, again, you know, you might be underestimating that the Uncle Bob is actually in his 50s and 60s, yeah, versus you still in your 20s and 30s. Yeah. So, you know, his financial advice that he would have received could have been completely different to what you're trying to do about it.

SPEAKER_00 10:12

So and just your fundamentals and and your beliefs is completely different. So if somebody does say that to you at a barbecue, I'd be saying to them, Oh, so how is it invested? You know, are you do you have a social responsible view on this? Do you get the cover or the support from your advisor and your provider that you want? You know?

SPEAKER_01 10:31

Like people will go hungry that day.

SPEAKER_00 10:32

Yeah, exactly. You know, but it's worth expanding on the conversation rather than just going, oh, performance, performance, because somebody's chasing a performance. They might be doing it and and investing in in quite a different way to how you feel that that's a good idea.

SPEAKER_01 10:45

Yeah, absolutely. Awesome Dave. Thank you so much. That's okay. On to the next one. Yep.