KiwiSaver Series with Matthew D’Souza: How to Maximise Your Government Contribution and Secure an Extra $521!
KiwiSaver expert, Matthew D’Souza, answers all of your KiwiSaver questions and provides some insightful commentary on one of our most talked about financial initiatives.
With the end of June rapidly approaching, it’s that time of year again when you have the chance to boost your KiwiSaver account with a generous $521 from the government. This annual boost is often referred to as the "member tax credit" or government contribution, and it’s a fantastic way to give your retirement savings an extra boost. But you need to make sure you’re eligible to get the full amount—let’s take a look at what you need to know to make sure you get your full entitlement.
What is the KiwiSaver Government Contribution?
The KiwiSaver government contribution is a benefit available to all KiwiSaver members aged between 18 and 65. Essentially, for every dollar you contribute to your KiwiSaver account, the government will match it with 50 cents, up to a maximum contribution of $521 each year. This means that to get the full $521, you need to contribute at least $1,042.86 to your KiwiSaver account by the end of the financial year on June 30.
How Do You Get It?
The good news is that there’s minimal effort required on your part. As long as you meet the age requirements and make contributions to your KiwiSaver fund, your provider will handle the rest. They’ll claim the government contribution on your behalf after June 30.
Your contributions can be made in several ways:
One-off lump sum: Make a single large payment directly to your KiwiSaver account.
Regular contributions from your salary: If you’re employed, contributing 3% of your income can easily get you to the target amount, especially if you earn at least $35,000 a year.
Voluntary payments: If you’re self-employed or not contributing enough through your salary, consider making voluntary payments. Just over $20 a week will do the trick.
Are People Missing Out?
Surprisingly, yes! Despite the obvious benefits, many Kiwis miss out on the full government contribution. In the last financial year, only 1.6 million out of 3.2 million KiwiSaver members received the full amount. Another 587,000 received a partial payment, leaving a significant number of people who could be benefiting from these extra funds but aren’t.
Research indicates that women, younger people, and those in default funds are more likely to miss out on the full government contribution. Regardless of where you fall, it’s never too late to start thinking about your retirement savings. The earlier you start, the more you’ll benefit from compound growth over time.
Why Does It Matter?
You might wonder if $521 really makes that much of a difference in the grand scheme of your retirement savings. The short answer is: Absolutely! Let’s break it down:
A 25-year-old in a growth fund could have an extra $55,808 at age 65 thanks to the government contribution and the power of compound returns.
A 35-year-old in a balanced fund could see an additional $26,917.
A 45-year-old in a conservative fund might end up with an extra $13,319.
These figures highlight how even a small annual contribution can significantly enhance your retirement nest egg over time.
Tips to Ensure You Don’t Miss Out
Check Your Contributions
Now is the perfect time to review your contributions. If you’re short of the $1,042.86 target, consider making an additional payment before June 30.
Set Up Automatic Payments
To make it easier, consider setting up an automatic payment of around $24 per week. This way, you’ll consistently hit your contribution target without having to think about it.
Plan Ahead
If you can’t make the full contribution this year, don’t stress. Plan ahead for next year to ensure you can maximise the benefit in 2025.
Remember, every dollar you contribute to your KiwiSaver is a step towards a more secure financial future. The government’s contribution is a generous bonus that can significantly boost your retirement savings. Whether you’re just starting out or are well into your career, making the most of this benefit is a smart financial move.
If you have any questions or would like to take a closer look at your KiwiSaver, don’t hesitate to reach out to us. Happy saving, and here’s to a brighter retirement!
About the Author
Having lived on three continents and in six cities, Matthew D’Souza is a citizen of the world! And it is that very background that helps him relate to clients from all walks of life. After catching the advisory bug young, Matthew left a successful career in performance marketing to guide his clients through the financial maze of life. With a special focus on KiwiSaver and financial planning, his aim is to delight every client with the retirement that they dream of. Seeing his clients' success is what drives him and gets him leaping out of bed in the mornings!