Should you be putting money into KiwiSaver while paying off a large mortgage? This is not a straightforward answer, as it depends on a few factors. Here are some guidelines on how to make the decision. On the face of it, it would make sense that if your KiwiSaver offers a return above the current mortgage rate, say 8% for KiwiSaver and 6% interest on your mortgage, you will want to contribute more to your KiwiSaver than paying off your mortgage. Is it really that simple? No, not at all!
Right now, the share market is not performing in a predictable way. Last year we saw some substantial falls and this year so far, it’s trying to bounce back. As many KiwiSaver funds include shares, this may be causing some anxiety.
It comes down to your thinking around money and your long-term goals. Many of us have the desire to be mortgage-free well before we retire. This may lead to you maintaining a small trickle into your KiwiSaver account and directing any excess funds into paying off the mortgage faster. This approach also reduces the risk of future interest rate rises on your mortgage.
On the other hand, the government contributions of up to $521 a year, and your employer contributions make KiwiSaver an attractive proposition.
So how do you decide? Our association with National Capital means that you have access to professional financial advisors who consider your financial and retirement goals when helping you come up with a KiwiSaver strategy. The first step in having a KiwiSaver strategy, which is personalised for you, is to complete our KiwiSaver HealthCheck. Click here to learn more.
This article is reproduced with permission from National Capital Limited FSP771555. The article is of a general nature and does not constitute regulated financial advice for an individual client. It may not be relevant to individual circumstances. Nothing in this article is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this article. The views and opinions expressed in this article are those of National Capital Limited and not of Mortgage Express Limited or any of its directors, contractors, consultants, employees, staff, or financial advisers trading using the Mortgage Express brand. To the maximum extent permitted by law, Mortgage Express Limited and /or any of its directors, contractors, consultants, employees, staff, or financial advisers trading using the Mortgage Express brand disclaim any liability or responsibility to any person for any direct or indirect loss or damage that may result from any act or omission by any person in relation to, or in reliance on, the comments or information contained in this article.
