My income is partly from employment and partly self-employment. With regard to the former, 4 per cent of my salary is currently paid into a KiwiSaver account. As at the end of this year, I expect to be fully self-employed. Will I need to, at that point, seek a contribution holiday?
Are there any particular advantages to a self-employed person paying into a KiwiSaver scheme as opposed to any other managed fund?
Mary Holm: There's no such thing as taking a contributions holiday from KiwiSaver
if you are self-employed. Those holidays are only for employees. The
self-employed and other non-employees can simply stop putting money into
KiwiSaver whenever they wish.
The more important question is whether it's wise to stop contributing once you are self-employed. And the answer is definitely not. While the self-employed and non-employees miss out on employer contributions, you still get tax credits from the government, which match your contributions dollar for dollar up to $20 a week, or $1043 a year.
This doubling of your contributions means your retirement savings will be twice as big as they would have been in another managed fund - assuming you make the same return in both.
So do try to contribute enough to get the maximum tax credit. A good way to do that is to set up an automatic monthly contribution of $87. For any saving beyond that, though, I suggest you use another managed fund, because you can access the money if you should need it. It's not uncommon for the self-employed to suddenly find they need funds for something unexpected.
Mary Holm is the author of bestselling books on KiwiSaver and personal finance. She is also a highly praised seminar presenter. Her written advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following that advice.
Mary Holm: Kiwi Saver: How to Make it Work for You
Gareth Morgan: Kiwisafer: How to Keep Your Money Safe in Kiwisaver
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