KiwiSaver: What's the best fund for your age and life stage?

KiwiSaver is a great way to invest to help buy a house, or fund your income when you retire. But how does your age and life stage affect your fund type? 

Kiwis of all ages can invest in KiwiSaver. Generation Z youngsters aged roughly four to 24 to the greying Baby Boomers can all use KiwiSaver to help achieve their goals. Then there’s the bonus of learning about investing along the way.

The four generations cover many individuals with different circumstances and goals, but only two things really matter for every age.

First, are you saving for retirement or your first home? Second, how far away are you from that goal?

Time and discipline are the two most important ingredients to a great KiwiSaver experience.

Time allows your money to build through the steady accumulation of contributions from your income, the government and your employer; and hopefully with investment returns on top.

Discipline is making sure you:

  • Think hard about the right fund for you.
  • Choose a provider who’s good at what they do and doesn’t charge too much.
  • Keep contributing through market cycles – don’t panic and pull out if there are a few bumps.
  • Check regularly to ensure your fund and your manager are doing what you expect.

For many, retirement is a long way away. That requires a lot of discipline, but also means you’ll probably have a lot of time. So, if your balance dips, there’s potentially more time for it to recover.

Saving for a first home, however, is usually a shorter-term goal. You might not have to maintain discipline for as long, but you need to get results – and recover from any mishaps – in less time. So, by generation, here’s what this can mean to you. 

Generation Z (born roughly after 1995)

Retirement: Discipline is most important for you if you are part of Generation Z. You may not appreciate this right now, but you’re in the best position of anyone to accumulate a lot of money by the time you stop working. Starting early and staying at it are the best indicators of potential future investment success. You don’t even have to save much, at least at the start, which is good, because you’re probably not drawing down a killer salary yet. You just have to save regularly. In most cases, people with your investment horizon (30 to 40 years) will go for a growth fund option. Because you have so much time, you can afford to take some risk. That doesn’t guarantee you can handle it when it happens, though. If you think you can’t handle your balance going down from time to time, you might still have to consider a lower-risk fund type.

First home: If you’re in the young end of this generation, you still may have 20 years or more before you want to buy a home. So, treat it like retirement. You can and should take on some risk. But as you get to the end of your savings period, you might want to dial the risk down to improve your chances of keeping what you have. If you’re late teens or older, you should probably start with a lower-risk fund – maybe a balanced or conservative fund. You may not have enough time to save a big house nest-egg and, more importantly, not enough time to recover from a dent to it, if the markets fluctuate.

Millennials (Born between 1981 and 1995)

Retirement: You’re a bit older, but your prime earning years are likely still ahead of you. You probably have 30 to 40 years before you stop work. If you didn’t make a start when you were younger, do it now, and get serious about your retirement saving. Growth funds make the most sense, unless you find market bumps too hard to handle. You may already have a very useful sum, so you might want to push it harder, perhaps by contributing more. You might consider investing outside KiwiSaver too.

First home: If you want your money quite soon for a house deposit, a conservative fund is probably best for you. You’re more likely to be interested in preserving what you have, with a little growth, rather than focusing 100 per cent on growing your pot of money with the associated risk of losing some – or even a lot – of it.


Gen X (Born roughly 1965-1981)

Retirement: You might be in denial about retirement, but it’s a good idea to be thinking about it. In your peak earning years, make sure your money is working hard not only for your current life, but the one you want when you stop working. In your 40s, being in a growth fund still makes sense. In your 50s you should progressively reduce risk to increase your chances of hitting your retirement sum goal. Balanced or even conservative fund types might be better for you over those years.

First home: You’re less likely to be using KiwiSaver for a first home in this age group, but the same logic applies. We assume you need it soon, so go conservative.


Baby Boomers (Born roughly 1946 to 1964)

Retirement: If you’re retired, you don’t have to pull your money out of your KiwiSaver account. You could leave the money in and draw down from your KiwiSaver account at set periods. If you’re over 65, the recent law change means, as of 1 July, if you’ve never been a member, you can now join too. Great news. If you’re drawing from your KiwiSaver savings, you should keep in mind not only what lifestyle you want, but for how long. If your money is still generating a return and your withdrawals are modest, you should hopefully be able to keep doing it at the rate you want. But if you dig too deep, too often, you could run out. Even if you’re not retired, preserving your capital is likely your priority. But some growth would be nice, too, to help sustain your pot a bit when you’re withdrawing from it. So conservative or a balanced fund could be best.

First home: Don’t all Baby Boomers already own houses? But seriously, it’s unlikely you’ll be saving for your first home if you’re in this age range.


General KiwiSaver tips - the 1-2-3-4

1. Choose a fund with a risk level to suit your goals and your ability to handle ups and downs in your balance.

All investments can be adapted to your need to take risk, and your ability to handle it. The need for risk is a mix of how much money you need, and how soon.

As you get closer to taking out your KiwiSaver money – for a home or retirement – you may want to take less risk. That’s because you have less time to make up any dips if the markets drop.

Financial advisers can help you decide what’s best for you and your personal situation.

Regardless of how much risk you need to take, some people find dips too hard to take. You’ll find it easier to take on less risk, or you’ll have to make your investing goal more modest.

2. Make sure you don’t pay too much in fees.

Risk might reduce your returns, but fees definitely do. Your KiwiSaver provider should explain what you’re paying in fees, and why they think it’s reasonable. The higher the fee, the better their argument should be. Be comfortable with how much you’re paying in fees, compared to what you’re getting in return.

3. If your manager claims to be able to manage risk actively, check those claims thoroughly.

Some managers claim to be good at managing risk. These will be ‘active’ managers, who can fine-tune your portfolio to help reduce harm or maximise benefit from market activity. Active management of your KiwiSaver money means there are real humans making investment decisions.If they’re good at this, and they don’t charge too much, this will reduce the risk in your investment and should help you get better returns.

But some managers aren’t as good as they claim. Look at how well they’ve done in the past to check this. You’ll often hear that past performance does not guarantee future performance, and it’s true.

Good past performance when markets are good can just be luck, or the manager ‘coasting’ on what the market’s doing. But if their past performance has been bad when the market was humming along, you may need to be cautious, or avoid them.

4. Relax – but review your investment and your KiwiSaver provider at least once a year, especially if you’re getting close to taking out your money.

If you’ve chosen a fund with the right amount of risk to suit your goals and how nervous you feel about risk, if you’re not paying too much in fees, and if you’re comfortable your manager can walk the talk on how they deal with risk, then yes – relax.

Don’t panic just because markets go through a rough patch and your balance goes down.

But don’t entirely put your feet up. Check in with your KiwiSaver account at least once a year to make sure you’re still on track to reach your goals and that your provider is still doing what you expect.

It’s also a good time to see what the other options are, as providers come and go, and ones that stick around can adjust their models too.

Published August 2019

Paul Gregory is the Chief Operating Officer at Pie Funds Management Limited. Pie Funds Management Limited is the issuer of the JUNO KiwiSaver Scheme. You can read our Product Disclosure Statement hereThis article is general in nature only and has not taken into account any particular person’s objectives or circumstances. It does not constitute financial advice. We recommend you speak with a financial adviser.