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 KiwiSaver helps with retirement cashflow  

Q. I have recently turned 65. I have been in KiwiSaver since 2007.   I am still working and my employer is still making contributions, so I have no intention of cashing in my KiwiSaver.   However, is it possible to take out a lump sum from my KiwiSaver account (say 20%) and leave the rest in the fund?   Alternatively, what about taking out a set amount every month to top up my income - is this also possible?

A. You should be able to do either.  As you have been in KiwiSaver since 2007 your KiwiSaver is now ‘unlocked’ and you can apply to make a withdrawal.  You can ask your fund manager for a withdrawal form, or download one from their website.  The form needs to be signed as a Statutory Declaration in front of a JP, solicitor or court registrar.  You will also need to have a copy of acceptable ID and address verified by an authorised person.

Have you worked out how much you need to live on when you retire?  Some people will tell you that you can’t retire with less than half a million dollars, but there are plenty of retirees managing on NZ Super alone.  Of course, the more you save now the more comfortable your retirement will be when you are no longer working. 

Assuming you have applied for NZ Super, if you are currently living alone you will be getting $577+ per fortnight (depending on your tax rate) on top of your earnings from work.  This is a significant boost to your income.  Are you saving this money?  Many people who reach the age of 65 and continue to work choose to save all their NZ Super to boost their retirement coffers.  In this way they can save over $15,000 per year.  If you have any debts, you should aim to pay these off before you finally stop working.

Some people find it hard to save, and they should set up a bank account which they can’t access too easily – if they can see the money, they spend it.  The money can also be saved into your KiwiSaver account.  Once the amount starts stacking up the motivation increases and it gets easier. 

Once you stop work you will be relying on NZ Super and you can set up regular withdrawals from your KiwiSaver to top up those fortnightly payments.  If you have $50,000 saved, you could withdraw $2,500 each year for those 20 years, plus any returns that your savings earn each year.

You can certainly apply to withdraw a lump sum, as long as you leave a minimum amount in your account.  This is decided by the fund manager and may be $1000 or $2000.  Each fund manager also sets their own minimum payment levels, both for lump sums and regular withdrawals.  I have looked at the two largest providers, ASB and ANZ.  The minimum one-off withdrawal allowed by ASB KiwiSaver is $500, and they allow a minimum regular withdrawal of $1000 fortnightly, monthly or quarterly.  The smallest lump sum you can withdraw from ANZ KiwiSaver is $1000, but they do allow smaller regular withdrawals from $200 per fortnight.  Other managers allow regular withdrawals from $100 per week.  If you are trying to stick to a budget it may be easier if you can set up weekly or fortnightly payments rather than monthly.  If you do not like the limits imposed by your manager, you are free to shop around and find another fund manager that can offer payments to suit you.  It may not be the best reason to switch from one KiwiSaver scheme to another, but if it helps your cashflow to withdraw $250 per week rather than $1000 per month, then it is worth considering.  This is also a good time to make sure the KiwiSaver fund you are in is the right one for your timeframe and risk profile.

Remember, every dollar that you spend today is one less dollar that you can spend in your retirement.  Take a good look at your budget now and work out exactly how much you need to live on from week to week.  If you need help to work out a realistic budget, you can get free advice from a Budget Adviser.

Shelley Hanna is an Authorised Financial Adviser FSP12241.  Her disclosure statement is available on request and free of charge by calling 06 870 3838 or go to www.peak.net.nz.  The information contained in this article is of a general nature and is not personalised.  Send your KiwiSaver questions to shelley.hanna@peak.net.nz