Unlocking the Complexity: AI Legalese Decoder Simplifies the KiwiSaver Opt-Out Process
- October 6, 2023
- Posted by: legaleseblogger
- Category: Related News
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Title: Considering Opting Out of Kiwisaver: Seeking Advice and Evaluating Potential Options
Introduction:
Hey everyone, I hope you’re doing well. I wanted to gather some insights and perspectives regarding my current situation and decision-making process. I want to ensure that I haven’t overlooked any crucial factors. Your feedback would be greatly appreciated.
Context:
Let me provide some background information before I delve into my query. I am currently in my mid-20s with a steady salary ranging from $100-150k per annum. The overtime work I engage in steadily increases my income yearly. At present, I am contributing 6% to my Kiwisaver, and my employer also contributes a matching 6% (which gets taxed down to approximately 4.5%). In terms of recent milestones, I have recently purchased my first home and utilized my Kiwisaver to assist with the deposit.
Considering the Opt-Out Scenario:
Now, I am considering whether it would be wise to opt out of Kiwisaver. The ramifications of this decision would mean diverting approximately 6-9k per year into a savings account. On one hand, these funds could be used to pay down my mortgage or even venture into self-directed investments like index funds. However, I would be forfeiting the benefits of the employee contributions. Nonetheless, this approach provides the advantage of having liquid investments.
The Uncertainty of Reaching 65:
One crucial aspect that influences my thinking is the uncertainty of reaching the age of 65, at which point I would be eligible to withdraw my Kiwisaver funds. Life is unpredictable, and unexpected events or circumstances may arise that curtail the opportunity to reap the benefits of a Kiwisaver at the stipulated age. Therefore, I am inclined towards exploring other avenues that offer more liquidity and control over my investments.
Savings and Investments for the Future:
Additionally, when I consider an extended career spanning 40 years or more, I envision accumulating a substantial corpus through wise investments and disciplined savings practices. Consequently, the funds accumulated in my Kiwisaver (even if it amounts to a substantial figure like $500k or more) may not have a significant impact on my quality of life post-retirement.
How AI Legalese Decoder Can Assist in This Situation:
In evaluating this scenario, it would be beneficial to leverage the AI Legalese Decoder. This innovative tool can assist in comprehending the complex legal jargon and intricacies associated with Kiwisaver terms and conditions. By utilizing AI Legalese Decoder, I can gain a comprehensive understanding of the potential long-term implications and drawbacks of opting out. It offers valuable insights into the legal aspects, providing me with a well-informed basis for decision-making.
Conclusion:
Having provided an overview of my circumstances and thought process, I kindly request your input and critique of my line of reasoning. If you spot any flaws or overlooked factors, I would greatly appreciate your feedback. Thank you, everyone, for your time and assistance!
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****** just grabbed a
If you lose out on the employer match, youd also lose out on the govt match. 6% match compounds a lot with a high salary over the years.
A few issues:
1) You can’t opt out. You can take a holiday, but you can’t opt out.
2) You will never be able to take the $6k – $9k savings and beat the 75%+ return on investment (as you mentioned, the employer contribution is taxed). That 75%+ return is before any actual investment as well, which would be compounding like a mofo.
3) Every decade, we increase our life expectancy by 2 years. So we should expect to live longer over time. Yes, that obviously can’t be maintained forever. But that’s the historical facts.
What you could do instead, if you were worried about not making it to 65, is to spend some money on your health. With a $100k – $150k income, you’ll be able to afford it.
If you aren’t planning to reach retirement age then not having a retirement fund tracks but I’d suggest is a teeny tiny bit shortsighted
The optimism of youth.
Just have it as a backup plan, you’re getting essentially 100% return straight away with employer contributions.
Most likely you will have a long life and live well past 65.
Seems stupid to opt out or lower your contributions if youÔÇÖre only in your mid 20ÔÇÖs on $100-150k. YouÔÇÖre earning more than most people between 30-50.
Take the free contributions from employer and government and use other discretionary income for additional mortgage payments or investments. 65 seems a long way off now but perception of time moving quickly increases each year and 65 year old you will be very pleased with a cash injection. The way youÔÇÖre going youÔÇÖre not going to miss it.
I’d be maxing that employee/employer contribution of 6% for sure
You can’t opt out. You can only take payment holidays.
For self employed, with no employer match itÔÇÖs much more of a no-brainer to only put in the minimum $1040 each year to get government contribution, then invest the rest outside of KS.
If your employer is matching to 6%, honestly IÔÇÖd stick with it.
Leave it in there. Not being able to touch it will save you from yourself. Use existing income to put aside for other investments as well as.
It is matched and the govt pay in $500 per year, you canÔÇÖt really beat this deal. Pay the minimum, donÔÇÖt think about it.
Why would you turn down free money? I’m not a financial wizard but even I wasn’t that silly.
Your employer contribution isn’t a minor amount of money – the fluidity you talk of doesn’t really justify walking away from that… Stay in Kiwisaver, keep getting your employer contribution at the same time…
Take as much as employer will match, invest yourself outside.
Do the minimum, get the free money, doesn’t have to be either or
Yeah donÔÇÖt like that. Get your employer match + govt contribution
“My idea is that there’s no guarantee that anyone will reach 65 in order to withdraw KS. Things can happen.”
Umm in that case your estate gets the KS funds, so it becomes part of your inheritance.
​
Also remember if you do move overseas (however not to Australia) you can withdraw it after a year. So if you are planning a 2 year OE, you could invest now get the 6% employer matching then withdraw it after a year in the UK and then invest it on how you want.
No guarantee youÔÇÖll get to 65.
I guarantee 65 year old you will be pissed at how stupid you were for stopping the free money train.
65 year old me is currently on the fence about my current habits.
Keep it. Your alternative plan relies on you actually doing the saving and investing, which you may not do well or throughout your life especially if you have a family. Keep it and if youÔÇÖre motivated to save more, do that as well
Opt out isn’t an option for you?
[https://www.ird.govt.nz/kiwisaver/kiwisaver-individuals/opting-out-of-kiwisaver](https://www.ird.govt.nz/kiwisaver/kiwisaver-individuals/opting-out-of-kiwisaver)
Savings suspension is a (partial) answer?
[https://www.ird.govt.nz/kiwisaver/kiwisaver-individuals/making-changes-to-my-kiwisaver/taking-a-savings–break](https://www.ird.govt.nz/kiwisaver/kiwisaver-individuals/making-changes-to-my-kiwisaver/taking-a-savings–break)
You’ll never beat the immediate 75% on investment from your employer match (4.5% / 6.0%) which over the long term is a significant sum of money.
Given you can’t opt out anyway then you’ve got to put at least 3% in and I’d be doing 6% if that’s what they match.
Just put in 3%, get the government contribution and invest 3% yourself. Then youÔÇÖve covered all eventualities.
Minimise your contribution so you still get the free employer and government contribution. Invest the rest yourself.
Anything else would be pure madness.
From someone who was earning a lot more at the same age – you’d be very silly to opt out.
My advice would be to put the minimum to get the max gov/employer contribution.
Then do what you want with the rest.
Yes, things can change, but there’ll be blood on the streets if they withhold super or extend the age by more than a couple of years.
Hey Op,
Not financial advice.
Always do the match if employer will do as it is a 100% gain for free.
Unlike my employer who does total comp which means my contribution and theirs is part of total salary.
I don’t have kiwisaver for the above reason.
Thanks everyone for the answers, appreciate the comments.
What about in this theoretical situation: Wanting to buy investment properties in near future, so would require all the free capital and ‘income’ possible. One of the banks that I applied for a mortgage from, one of their conditions was the drop my KS contributions.
Is there any scenario where applying for saving suspension is feasible?
You can opt out only between 2 and 8 weeks of being enrolled into KiwiSaver for the first time (ever).
The flaw in your logic is that free money is good.
6k a year youd be losing from employer contributions gunna be a huge hit to ur savings, maybe that money wont be.liquid, but.you might feel more.comfortable using your other money knowing your retirement is well taken care of
What do you do for a job?