Hi there,
I have no doubt you’ve heard about the ongoing war in the Middle East in Iran. Though if you haven’t heard about it, you might have noticed the latest hike in petrol prices.
As a result, your KiwiSaver has been on a roller coaster lately. Some common questions I receive from clients when they see their balance drop during periods of market volatility are:
“I’ve lost money in my KiwiSaver–should I quickly change my fund types?”
The truth is, volatility in KiwiSaver can be a very good thing, particularly for long-term investors. While it feels unsettling, market fluctuations allow regular contributions (dollar-cost averaging) to buy more units at lower prices, boosting potential returns when markets recover. Volatility is often necessary to achieve higher long-term growth.
Below is a very simplified example in KiwiSaver:
You have $100 in cash and buy 10 Apple shares at $10 per share. So, your KiwiSaver balance shows $100.
During volatility, Apple’s price drops to $5 per share, and your KiwiSaver balance shows only $50. Panic? No, because now you can buy 2 Apple shares for $10. What a discount!
History shows the market always bounces back, as seen in the latest global trade war, the Covid-19 pandemic, and the 2008 financial crisis. When the market bounces back again, you will be smiling at your KiwiSaver balance as you buy all those shares at a huge discount. Hence, the saying, ‘rich people get richer during a recession (AKA volatile market).’
Why Volatility Can Benefit You:
- Buying at a Discount: When markets fall, your regular contributions buy more units, which increases your potential for higher returns when the market recovers.
- Higher Potential Returns: Historically, more volatile (growth or aggressive) funds have offered higher long-term returns than stable, lower-risk funds.
- Time in the Market: Because contributions are made every pay period, you avoid trying to pick the “best time” to invest, instead benefiting from market cycles.
Key Consideration:
- Stay the Course: Switching to cash/conservative funds during downturns will lock in losses and miss the recovery.
As Warren Buffett once said, “Market volatility isn’t a threat—it’s an opportunity to buy quality companies at discounted prices”.
Here is a great article published by 1News that provides further insight into the effects of volatility on KiwiSaver balances: KiwiSaver hit by Iran crisis – but the volatility could boost balances.
If you would like to review your KiwiSaver, home loan, or insurance, get in touch for a free consultation below.
What Happens if You Currently Contribute 3% to KiwiSaver from 1st April 2026?
- Your contribution: increases from 3% to 3.5%
- Your employer’s contribution: also increases to 3.5% (yay)
- How it happens: automatically through payroll
You don’t need to take any action for the new rate to apply – it will update automatically from 1 April 2026.
How Contribution Rate Changes Affect Long-Term KiwiSaver Savings
Even small increases to your KiwiSaver contributions can make a meaningful difference over the long term. While retirement might feel a long way off for some people, extra contributions now can be the difference between simply getting by and having more financial freedom later on.
I often recommend contributing 10% rather than the minimum 3% (soon to be 3.5%) if your circumstances allow. You’ll be amazed at how quickly your KiwiSaver can grow over time.
For perspective, in Australia, the minimum superannuation contribution is 12%. As a result, many Australians retire with superannuation balances in the hundreds of thousands of dollars. Wouldn’t it be great to have that level of financial comfort when you reach retirement?
If you’d like guidance on reviewing your KiwiSaver/insurance or buying your first home by using your KiwiSaver as a deposit, or know someone who would, get in touch for a free consultation below.
