Article: Speak Easy

Withdrawing KiwiSaver For Your First Home with Michael BoturWithdrawing KiwiSaver For Your First Home with Michael Botur

Over the past month, I decided to withdraw my KiwiSaver money from the investment fund managing it and take it over to the investment fund of my bank. It wasn’t just because my former fund until 2016 had some of its money tied up with Honeywell International which is involved in the trade of nuclear weapons, cluster bombs and tobacco manufacture (my new bank/fund appears to invest in all that garbage by proxy too, or at least they used to before the media raised questions about it.) Today I simply want my KiwiSaver earnings to appear on screen when I log in to my internet banking… not that I have many earnings left, as I have barely topped up my KiwiSave since I withdrew most of it in 2015 to help put together a home loan deposit. I’d been making deposits ever since it was introduced in 2007. I had the income of a typical 20-something back then, so I had not much more than $10,000 to draw upon, but every dollar was helpful towards getting a mortgage.

Before we continue, don’t get too excited and think that you can easily withdraw your KiwiSaver at any time and take it to the casino. There are only a couple of reasons you can withdraw your KiwiSaver before you turn 65. They are:

- If you are moving overseas
- If you can prove you’re experiencing significant financial hardship
- Serious illness
- Buying your first home

I hope I haven’t made it sound easy to pull out your KiwiSaver, because it’s not, and it wasn’t set up to be when Labour introduced KiwiSaver ten years ago. Kiwis have been taking record amounts of money out of KiwiSaver accounts to buy first homes in the past year, but that money isn’t being lost, and I don’t think there’s evidence people are short-changing their future selves. We have a hot housing market and the message is Get in now or Get left behind. Okay, so there exist some studies from ANZ showing that if you leave your money in KiwiSaver until you’re 65 without withdrawing any for a home loan deposit, you could end up with over 40-50% more money (withdraw for a home loan and you could on average have $144,000 in their bank account at 65, comparing to $209,000 if you did not withdraw the money, in one example). How else are people supposed to get a deposit, though, when a mortgage deposit often needs to be $100,000?

Stories in the NZ Herald and over the past two years have claimed one or two experts reckon people should be worried about what’s happening with their KiwiSaver after they withdraw their ‘nest egg’, and switch up to a riskier investment scheme if they don’t have many years left to maximise their investment. “People who raid their KiwiSaver accounts to buy a home may be putting a comfortable retirement at risk, experts are warning,” one story claimed. I think that deserves a yeah, nah. Obviously if you take out a huge chunk of your KiwiSaver when you’re, say, 45 years old and getting quite close to retirement, you won’t have much time to recover that money. But owning a home at the national median house price of $529,000 ($850,500 in Auckland) is worth far more than your KiwiSaver was ever likely to be worth anyway, and the financial gains you make when you own a house will probably outstrip the old rate of KiwiSaver deposits you were making anyway. My advice, as an unregistered financial adviser: get yourself a home, but don’t forget to dribble some deposits into KiwiSaver, too.

Michael Botur has published journalism in NZ Herald, Herald on Sunday, Sunday Star-Times and Mana and he writes a lot of fiction. He moved to Whangarei in 2015 and was ecstatic to be able to afford a house here.

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