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Are first-home buyers who make KiwiSaver withdrawals for their deposit saving enough for retirement?

Personal Finance / news
Are first-home buyers who make KiwiSaver withdrawals for their deposit saving enough for retirement?
A composite image of New Zealand money overlayed by a piggy bank and a miniature figure of a person standing in front of a house.
The latest Retirement Expenditure Guidelines from Massey University’s NZ Fin-Ed Centre was released on Wednesday. Image source: 123rf.com

With concerns and discussions around superannuation and what it will look like in the future, an expert says people should be continuing to operate on the basis that it will be there.

“I’m closer to retirement age than perhaps I’d like to admit and even when I was young, there was a lot of discussion about is it still going to be around. Well, it’s still around many years later,” Massey University Associate Professor Claire Matthews says.

“I think it’s unlikely that it will actually be removed and it’s unlikely that there will be huge changes … But fundamentally, people should be planning on that basis, and that's actually part of the argument for why it needs to continue."

"Because people are planning on the basis that, yes, they’ve got their KiwiSaver and they will have some additional funds ... They are planning on the basis that’s on top of New Zealand Super.”

Matthews’ comments coincide with the release of the latest Retirement Expenditure Guidelines from Massey University’s NZ Fin-Ed Centre on Wednesday.

The report is used by advisers, policymakers and individuals when discussing retirement planning. It aims to provide a realistic view of retirement living costs across different household types and regions.

The Guidelines are prepared from Statistics New Zealand’s Household Economic Survey. Based on the household living-costs price indexes, inflation experienced in the 12 months to the December 2024 quarter for superannuitants was 3.6%.

Matthews, the report author, says one of the key things that stood out to her was inflation for the household groups relative to the CPI (consumer price index) inflation.

“So many of them having inflation at a higher rate demonstrates that despite the fact there is an adjustment for CPI, it’s not actually keeping them up as it needs to because their experience of inflation is actually greater than that,” Matthews says.

The report found:

  • The key drivers for increased costs for superannuants for the 12 months ending June 30 were food, property rates and related services, household energy, and recreation and culture
  • The household groups considered in this report are spending more than is received from NZ Superannuation, reflecting access to other income and/or savings

When it came to retirees, Matthews says it has got more difficult for them because they’ve generally got a fixed income.

“So they’re very aware of those additional costs and they don’t have the same opportunities, for example, to go to their boss and say ‘can I have a bit more money?’”

But Matthews says it’s not a worry. “In the past, they’ve done reasonably well and there have been times in the past where the rate of inflation they’ve experienced hasn’t been as high as the CPI.”

But if this was an ongoing issue, then Matthews says she thinks it would be a problem.

Currently NZ Super after tax is about:

  • $1076.84 if you live alone or with a dependent child
  • $994 if you live with someone who is either 18 or older or visiting and staying more than 13 weeks in any 26 week period
  • $828.34 each if you and your partner meet the NZ Super criteria
  • $828.34 if between you and your partner, only one of you meets the NZ Super criteria

(These numbers are with the M tax code and would change if you're on a different tax code such as S, SH, ST and SA).

First-home buyers

Another thing the report looks at - is this question: Are first-home buyers who use their KiwiSaver to fund their deposit, saving enough for their retirement?

With the average age of first-home buyers in New Zealand now around 35, many make a KiwiSaver withdrawal to fund their deposit.

The report, which includes modelling of a range of scenarios, found someone who started contributing to KiwiSaver in their early 20s , even after withdrawing around $75,000 for a first-home purchase at age 35, could still reach the lump sum needed to fund a modest retirement by age 65.

But for people who delayed joining KiwiSaver until their 40s or 50s, or who paused contributions for several years, the gap between savings and retirement gets much harder to close, the report says.

Matthews says “provided you do continue to save [after withdrawing KiwiSaver funds for a first house], then you’re still reasonably well on track to where you need to be, and you’re going to have your own home as well”.

“That is really setting you up.”

But Matthews says if you’re doing this by the age of 35, “then you can recover reasonably well”.

“For most people, KiwiSaver shouldn’t end with the house purchase. Think of it as two chapters of the same story. First helping you buy your home, then helping you retire securely in it," Matthews says.

Going to notice the difference

While she acknowledged people can experience hardship, Matthews says KiwiSaver withdrawals for this needs to be the last option.

“We have situations where things don’t go according to plan and so there’s a need in those situations where maybe you need to absolutely put your contributions on hold for a while. The point is to make sure that at the earliest possible opportunity, that you are restarting them,” she says.

“Otherwise your future self, when you hit retirement, is going to really notice the difference.”

When it comes to how much retirees need on top of NZ Super, those numbers for 2025 are:

  • $181,000 for a one-person “No Frills – Metro” lifestyle
  • $273,000 for a one-person “Choices – Metro” lifestyle
  • $118,000 for a two-person “No Frills – Metro” lifestyle
  • $1.033 million for a two-person “Choices – Metro” lifestyle

The ‘No Frills’ guideline reflects a basic stand of living that includes limited, if any, luxuries, the report says, while ‘Choices’ is a more comfortable standard of living that includes some luxuries.

“I do need to emphasise that some people don’t have anything on top of KiwiSaver, on top of New Zealand Super, and they can retire and they can survive.

“It’s just that it’s not necessarily the level of retirement that you want - but you don’t necessarily need the sorts of amounts that a lot of people say.”

Matthews says $1 million is often thrown around as the amount most people need but the guidelines show that only one household needs that - a two-person group.

“There’s two of them saving that so it’s half a million each. So hopefully it’s to say that this is a lot more achievable.”

Matthews says if you contribute to KiwiSaver then that is going to go a substantial way towards that, depending on when you start. She encourages people to start as soon as possible; “because the longer you’re saving for retirement, the better it is”.

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2 Comments

Owning, without mortgage is a great support in retirement.

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It might be that a home looks a better investment than frothy, volatile, and sometimes apparently loony markets: if the worst happens you can keep chickens and dig up the lawn to plant vegetables.

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