What Do I Do With My KiwiSaver When I Retire?

"What should I do with my KiwiSaver when I retire" is a question for the ages. This guide, the first of its kind in New Zealand, extensively explains your options and helps you decide what is best for your everyday life.

Updated 13 September 2024

Know this first:

Your KiwiSaver balance is yours to draw down tax-free, given there is no capital gains tax in New Zealand.
This means every $1 you have in KiwiSaver is yours to do what you want with.
It's also 100% of yours and yours to do what you want with. You don't need to share it with anyone, which is why deciding what to do with it is very important and overwhelms many people.

To help you understand all the options available, we cover:

Introductory Frequently Asked Questions

Should I move my KiwiSaver to a low-risk fund once I retire?

KiwiSaver offers a range of different funds with varying degrees of risk. The lowest risk ones are designed to protect your money from significant sharemarket events by offering 'conservative' and 'cash' funds. The idea is that retirees have less time to build up their KiwiSaver balance, so low-risk funds must protect the invested money from market shocks by holding it in cash or term deposits. Every KiwiSaver scheme offers a low-risk fund that moves most of your money out of the sharemarket and puts it into cash-backed and term investments.

Should every retiree be in a conservative fund?

It depends on the retiree. There is no 'one-fund-fits-all' given the unique financial needs every New Zealander has. Also, people are living longer, so moving everything into a 3% p.a. conservative fund forever may be short-sighted in higher inflationary times. This is especially true if growth funds average returns of 10%+ p.a., and you're unlikely to need the majority of your KiwiSaver balance for years to come.

What is right for you comes down to your financial situation. You may want to hedge your bets and pick a balanced fund or a moderate fund - our comparison guide to Balanced vs Moderate vs Growth KiwiSaver Funds explains the difference and pros and cons of each. Whatever you do, make an informed choice about how you want your KiwiSaver invested during your retirement.

What should I spend my KiwiSaver money on after withdrawing it?

If you're debt-free, the money you withdraw will go a long way. Beyond covering everyday expenses, popular uses of KiwiSaver withdrawals include:

Going on a holiday
Medical treatment (to avoid the public waiting lists at DHBs)
Home improvements (new roof, recladding, new carpets etc.)
Buying a new car
Helping a family member

How much you spend and what you spend it on is entirely up to you. You don't need to ask for permission to withdraw or spend it, so the options are endless. We explain the most common choices below - what is right for you may change as you get older, so please understand that no decision you make is final.

Seven Options for Your KiwiSaver When You Retire

Our list, in no particular order, outlines everything you need to know to make the right choice for your needs, wants and everyday lifestyle.

Option 1: Withdraw money to pay off all debts (if you have any) and take the rest out in lump sums

If you're retired and still have some debts, we suggest considering the following process to help your KiwiSaver money improve your day-to-day lifestyle:

Step 1: Clear credit card debts, personal debts and any other debt that's costing you money. This is the most 'expensive' debt, so getting rid of it as much as possible will make your income (e.g. superannuation payments) go further. You can then lower your credit card limits to reduce the risk of getting into debt again. For example, a $1,000 limit is a 'safe' amount to cover emergencies while avoiding racking up non-essential spending/debt.
Step 2: Pay down your mortgage as much as you can - the less ongoing costs and the more security you have as a retiree, the better.
Step 3: Put six months of essential expenses into a savings/emergency fund. While superannuation payments are designed to cover essential expenses, having a sizeable savings account will give you more freedom.

In summary, what do I need to do?

List all of your debts, everything from a mortgage down to a credit card or personal loan. A popular approach is to repay the loans with the highest interest rates, reducing the amount of money you spend servicing debt. However, many people prefer to repay their mortgage as a priority for peace of mind.
Once your debts are paid off, you can withdraw the balance as you need it or follow the 4% rule or pay a fixed amount to yourself fortnightly or monthly to give yourself an annual spending budget or regular income.

Option Two: Retire later (e.g. work beyond 65 and keep contributing to KiwiSaver)

Many New Zealanders don't want to retire when they turn 65 and prefer to keep active in the job market even if they scale back their hours. However, if you plan to do this, you will still receive the full pension payment to complement your wages. This is because, at the age of 65, superannuation payments are a right regardless of whether you carry on working.

However, your employer is not legally required to keep making employer contributions once you turn 65. So they might continue to contribute, but if they don't, it may be worth ending your KiwiSaver contributions, given the government contribution also stops at 65.

Many New Zealanders enjoy the financial and lifestyle benefits of part-time paid employment while getting a boost from New Zealand superannuation. Also, there is less need to access KiwiSaver funds given the regular income generated.

However, if you're looking to buy big-ticket items, making sizeable withdrawals annually - for example, around 5% of the balance - and moving it to a savings account is a popular approach. From there, you can spend the money as you need it while your superannuation and wages help with everyday costs.

MoneyHub Founder Christopher Walsh comments:
"My parents are in their 70s and are highly active, and many of their friends of a similar age keep busy running businesses and volunteering. I firmly believe that retirement as a concept is misunderstood - many New Zealanders intend to keep working, albeit more on their terms. Having a regular income, superannuation payments, and the freedom to draw down KiwiSaver puts you in an incredibly strong financial position. If you're thinking about staying in the workforce, you have nothing to lose if you enjoy what you do and want to move to a part-time role. In any case, I wish you the best in this exciting chapter of your life".

In summary, what do I need to do?

Confirm with your employer if you'll be receiving a KiwiSaver contribution after you turn 65. If you do, it's worthwhile to keep contributing. If you don't, you may want to stop contributing altogether.
Make sure your tax information is correct so that your employer pays you correctly. You'll need to remind them you're receiving the NZ Superannuation payment and make sure they tax you correctly after you turn 65.
Decide how much to withdraw from KiwiSaver. Many people 65+ in paid employment manage without making large drawdowns. To properly prepare, we suggest thinking about what you will need, when you will need it and how much it will cost. You can then see how that compares to your current KiwiSaver balance.

Option 3: Withdraw KiwiSaver in stages and spend money using the 4% rule

The "4% rule" is a popular way to spend retirement savings responsibly without the risk of running out of money. Inspired by the Financial Independence Retire Early movement, the 4% rule functions as follows:

The 4% rule states that you can withdraw up to 4% of your portfolio's value each year. So, for example – if you have $250,000 in your KiwiSaver, you could spend $10,000 in your first year of retirement.
Beginning in the second year of retirement, you adjust this amount for inflation. For example, if inflation was 3%, you could withdraw $10,300 ($10,000 x 1.03).
The 4% rule states that retirees should withdraw 4% of their portfolio's worth each year during retirement – this is frequently misunderstood. The 4% rule only applies in the first year of retirement. The amount withdrawn is then determined by inflation.
Your KiwiSaver balance should, in the long-term, keep growing, offsetting some of the withdrawals you make. Also, some of the money withdrawn may be put into a savings account or term deposits, earning a small amount of interest.

Our View: the 4% rule is a good starting point if you are debt-free and have other assets such as non-KiwiSaver investments and cash in the bank. With inflation around 6%, costs throughout New Zealand have never been higher. Being able to routinely withdraw around 4% of your KiwiSaver balance gives you a lot of financial freedom. You can then budget the money and spend it how you see fit.

In summary, what do I need to do?

The 4% rule works best when you make one annual withdrawal of around 4% of your KiwiSaver balance and put it in a savings account.
By doing so, you ring-fence your funds and self-manage how it's spent. If you run out before the 12 months is up, you can decide to withdraw more (and therefore less next year to balance out to 4% per year) or wait until the new year.

Option 4: Keep it where it is and spend other investments

KiwiSaver is there to be spent, but you may want to run down other investments first. If this is you, you're likely in a strong financial position, and KiwiSaver won't play an integral part in your retirement. In such instances, you can carry on as unusual and decide how to spend your KiwiSaver when appropriate.

In summary, what do I need to do?

Nothing. You can leave KiwiSaver where it is and carry on as normal. If you do need to buy something and don't have the money on hand, you can contact client services of any of your investments and sell down a portion or all of it.
If you wish to take your KiwiSaver balance and invest it independently, you can withdraw some or all of your balance at any time after you turn 65. Again, you'll need to contact your KiwiSaver scheme to arrange the withdrawal.

Option 5: Invest some of the balance into a retirement income product such as an income-distributing fund or an annuity

Income-distributing funds are relatively unpopular in New Zealand and have yet to gain traction among retirees or general investors. They work just like a managed fund does - you invest a sum of money with a fund manager who charges a fee. However, the fund manager agrees to pay you a regular income from the fund - usually a monthly or fortnightly payment into your bank account.

Annuities are investment products that charge you a fee to pay you an 'income' from your investment. For example, you may invest $100,000 into an annuity with a 2% fee that pays you 5% a year. The 5% payment is apportioned over a year, so you're paid fortnightly or monthly. At the same time, the annuity manager then invests your money on your behalf, hoping to increase your original $100,000 even though a portion of it will be withdrawn and paid to you regularly.

The problem in New Zealand is that the annuity industry hasn't been profitable for any manager, and the major provider, Lifetime, has discontinued offering the product.

Overall, we believe annuity products are unsuitable for KiwiSaver funds, and it's more cost-effective to withdraw sums from KiwiSaver as you need it.

In summary, what do I need to do?

One example is the AMP Capital Income Generator Fund if you're considering either a fund or an annuity-type product and similar funds. However, the popularity of these funds is limited - AMP's fund has been running since 2014 and has a relatively small balance of less than $100m. We urge caution with any such investment given the costs involved vs the potential returns.
Lifetime Retirement Income also offers a revised product since discontinuing their annuity product - you can read more about there current offering here.
Otherwise, the most cost-effective and simple option is to make regular payments to yourself from KiwiSaver while leaving the rest of your investment to grow. We discuss how this works here.

Option 6: Take a portion and pay it to yourself fortnightly

Many New Zealanders are either reluctant to spend their KiwiSaver money. Others spend it too quickly and run out early into their retirement. If you're looking to preserve your KiwiSaver for the long term, you will need to make a distribution plan and stick to it.

We suggest using the 4% rule as a benchmark for how much of your KiwiSaver balance should be paid into your bank account every month, fortnight or week. As KiwiSaver doesn't have any capital gains taxes or distribution limits, the table below shows how much money you would regularly receive using the 4% rule. What is clear is that small KiwiSaver balances, for example, those below $50,000, don't provide any significant level of regular income - $38 a week may be useful but won't enrich your life.

KiwiSaver Balance	Monthly Income	Fortnightly	Weekly
$50,000	$167	$77	$38
$100,000	$333	$154	$77
$200,000	$667	$308	$154
$500,000	$1,667	$769	$385
$1,000,000	$3,333	$1,538	$769

In summary, what do I need to do?

The best way to pay yourself KiwiSaver money as income is by using auto payments from a bank. It works as follows:

a) You withdraw 4% of your balance in one go and have it deposited into a specific savings account. You may want to name this account' KiwiSaver money for 2022' (or whatever the year is).
b) You then decide how regularly you want the payments. If it's every month, you will then divide the balance in your savings account by 12, and set up automatic monthly payments into your everyday bank account for that amount.
c) At the end of the year, you will need to withdraw another 4% from your KiwiSaver balance and divide the amount by 12 to work out the automatic monthly payment you'll receive. It may be more or less than your existing amount, so you'll need to adjust the automatic payment in online banking.

An example best explains how this works:

Michael decides to withdraw 4% of his $200,000 KiwiSaver balance and pay himself a monthly income with the proceeds.
He notifies his KiwiSaver provider, and $8,000 is deposited into his bank account. He moves this money to a special savings account and sets up an automatic monthly payment of $666 which will be paid into his everyday account.
In addition, any interest generated from the savings account will be added to the balance. Still, Michael knows this won't be significant - the purpose is to protect a portion of his KiwiSaver balance and pay it out as income.
Michael then enjoys his monthly payments and spends the money how he wants. After 12 months, he makes another withdrawal of 4% of his current KiwiSaver balance, recalculates how much that will be per month and adjusts his automatic payment accordingly.

Option 7: Mix your options to suit your immediate needs

You don't have to choose just one of the options above - KiwiSaver lets you mix different options to help meet your needs at different stages of your retirement.

For example, you may want to pay yourself a fixed monthly income from KiwiSaver (as outlined here) at the start of your retirement. However, you may want to also withdraw a portion and invest it in something outside of KiwiSaver, such as an income-paying fund or share to further boost the amount of money you regularly receive into your bank account.

In summary, what do I need to do?

KiwiSaver is one financial support available during your retirement, but for most people, the biggest help will come from their fortnightly superannuation payment.
If you are unsure about what to do with KiwiSaver, the good news is that you don't need to do anything.

Conclusion and Final Thoughts

The 4% rule is arguably the least-risky method of letting you access KiwiSaver without threatening the entire balance.
If you have debt owing, using KiwiSaver to clear the balances will likely boost your regular income as you'll save money on expensive interest costs.
It's easy to set yourself up with automatic income payments; we estimate that the time to withdraw a fixed amount from your KiwiSaver and organise it to be paid every month will take no longer than an hour per year. You then have certainty over your income and can budget accordingly.
Retirement is a good time to save money on non-essentials, so your KiwiSaver money will go even further. Our guides to saving money on household expenses, minimising driving costs and transitioning to a single income have further ideas to help you.

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