A number of clients have asked me about accessing their KiwiSaver funds when they retire. I usually review the choices they have with the money. These are:-
Jim (Not his real name) is retiring soon. He has approximately $50,000 in his KiwiSaver account.
The KiwiSaver fund he is in has a long term return of 8%pa. (after fees but before tax).
Now I am going to make a few assumptions about Jim that I can use to estimate the income payments from his KiwiSaver account.
a) When Jim retires his tax rate will be 10.5% so for the purposes of estimation I will assume that the after tax earning rate on Jim’s KiwiSaver money is 6.96%. Payments from a KiwiSaver Scheme are Tax paid.
b) Jim is 65yo. He wants the income to be paid twice a year until he is 85yo. This is 40 payments.
c) His KiwiSaver fund will maintain the long term before tax earning rate of 8%pa
Then for Jim his actual income then looks like the following:
- Every six months for 20 years withdraw $2355.00
- Total amount withdrawn after 20 years = $93,994.05
Not bad for a starting figure of $50,000.
With all estimations of this nature it is indicative only. I explained to Jim that he may not live until he is 85. I also explained that there is the possibility of a major market pull back, and the actual earnings rate will be affected by this.
If you joined KiwiSaver through me and would like me to do a similar retirement income estimate on your account please contact me.