Here’s a fun fact.
A laurel is a particular evergreen tree with small yellow flowers and black berries. Ancient Romans and Greeks would use its leaves to fashion crowns that were worn to represent victory. Ave, Caesar.
So why are we talking about laurels?
We’re just checking out your Kiwisaver contributions and, well, those laurels? You’re resting on them.
Many of us think that, if we – and our employer – are contributing to KiwiSaver every payday, we’re ticking the necessary boxes to be track for a comfortable retirement. For almost all of us, that means 3% from our paycheque, and another 3% from our employer. We assume this will get us to our superannuation target.
Those mandatory contributions will definitely help to get us some of the way there, but here’s the thing about that 6%. If KiwiSaver is a safety net, its default settings are low enough that we’re still going to hit the ground – just not as soon, and not quite as hard.
Compared to many other countries, our combined 6% is not nearly enough to build up adequate wealth with which to comfortably retire.
In neighbouring Australia, for example, the total is more like 13%. Canada’s is over 10%. France’s is about 11%. Our single digit contribution leaves us rather short, and our national KiwiSaver Scheme – while a great starting point for retirement savings – is not the set-and-forget solution that many of us assume it to be.
“People just aren’t asking,” laments financial planner Kathryn Alborough. “They’re assuming that Kiwisaver is their retirement provision. It isn’t, and it was never meant to be. It’s a partial retirement provision, set up on a low-cost basis.”
Kathryn, co-founder of Motueka’s Castle Trust Financial Planning, says that your retirement fund should not be just the arbitrary pool (or puddle) of investments that you end up with when you stumble past your 65th birthday. Rather, you should set a target now, and work backwards from there to here.
But what exactly is that target, anyway? How on earth do we figure out what we’ll need, and how to get from here to there?
A professional like Kathryn has the forecasting software and lived experience to help. “And keep checking on that target,” she advises, because everybody’s circumstances change as they journey towards retirement, and those forecasts can be altered along the way.
Kathryn says that, as a sweeping generalisation, your first five years of superannuation contributions make up 50% of your fund by the time you are 65, thanks to the miracle of compound interest. Her point is that the earlier you start investing money towards your retirement, the longer you have to let that money mushroom within its investments.
However, the Castle Trust ethos is not to counsel you to save every skerrick of cash that you possibly can. They believe in balance, so that you can fully enjoy life along the way. Their advisers work with your individual situation to help you set targets that don’t rob your present-day self to advance your future.
Call in today to see the Castle Trust team on Motueka’s High Street and next door to the Library in Richmond, and begin the conversation about getting you from here, to there. It’s time to earn those retirement plan laurels.
– By Elise Vollweiler