You're listening to a Shasese podcast, which often get a question should I be paying off my mortgage or should I be contributing to key we Saver, And obviously you should be contributing to key we Saver, But then it's how much and what's my emphasis?
Yeah, So, as a general rule, you contribute to key we Saver if you're not in financial hardship, and you contribute up to the level that your employer matches. If you're self employed, there isn't that much of an incentive to contribute beyond what the government will unlock the attacks credit for you. But let's say it's three percent. So if you had money outside of that, then the question is, well, what do I do with it? Well, yes, you could put it into key we Saver, and I guess that's
a form of compulsory saving. But that is assuming that you haven't purchased your first home, I guess, And you don't need that money for retirement. I guess it protects it, it locks it in a vault for you. But for most of us, the clients that I'm working with, I can put that money to work a lot faster and a lot harder than if it was left in a kiwisaver fund. So contributing up to the level your employer matches,
absolutely could put that into Kiwisaver. It's the extra contribution that I'm I'm wary of because if I can put that money towards paying your mortgage off faster, not only are we creating flexibility and financial resilience now that you can benefit, but we're creating equity and your property as well that we could recycle as a deposit for an investment property. And so then you've got kind of three
layers working hard for you. You've got your this greater cash surplus, which increases your resilience, which means you can weather storms more comfortably. We've got your mortgage coming down, which is saving you interest costs, getting you mortgage free faster, and also creating equity in your home. And then we're tapping into that equity as a deposit for an investment property.
Those three things will outperform any ke we Saver investment kind of any day of the week, any extra key we Saver investment beyond what your employer matches.
But the beauty of compound interest, obviously you need to be contributing something though so that you can take advantage of time.
Yes, but yes, but I do think that the benefit of ki We saver isn't really the compound interest, and it isn't really time. It's the fact that your employer is contributing, so you're getting one hundred percent return. That is the beautiful thing. The actual fund that you're investing in after inflation in some of those things might actually give quite a poor return, but getting access to that
employer money is the golden ticket for Kiwi saver. So yes, having it locked up so you can't touch it is also helpful because you don't inadvertently fritter it away. But it's more that it's just locked up for a long period of time rather than the based performance of the fund, which is where I guess that compounding concept comes in.
What are some of the biggest mistakes Then you see that people make.
I think a lot of Kiwis are sleep walking towards their retirement and there's sort of this hope that it'll be okay. They were brought up by parents or grandparents where it was okay, so you could see why they would make that conclusion. But for most of us that isn't going to be the case, and so then you say, well,
what is not being okay actually mean? Because no one's dying as a result of not having their retirement, but the impact of not having enough save for your retirement and Kiwi saber normally accounts for around forty percent of what you are likely to need for retirement. So it's helpful, but it's not the silver bullet. It's better than no bullet, but it's not the silver bullet. I've got to work
out what to do with the rest. So if you haven't been able to amass the rest of them money that you needed, then it just is going to mean, well, you're going to need to downsize your home earlier, you might need to work longer, You're unlikely to have the retirement you want, or be able to help the kids
as you expect it. I don't think any of those things are literally the end of the world, but it is disappointing, I think for many of us when we know that we have earned good income, so why is that our financial reality Investing involves risk you might lose the money you start with. We recommend talking to a licensed financial advisor. We also recommend reading product disclosure documents before deciding to invest,