KiwiSaver funds that adjust as you age

When you’re shopping around for a KiwiSaver fund, it’s good to know about all the options out there. And that means not just the funds that your current provider has on offer, but everything available to you in the market.

It may be a good idea to switch, or just confirm you’re in the right place. The point is to make an active choice.

Sorted’s KiwiSaver fund finder can help. But there is a category of fund (or funds – more on that later) that is more difficult to compare. They can be a good fit for some: what’s commonly called a “life stages” option.

You’ll find these called by a few different names: Age Steps, GlidePath, LifeCycle, Lifesteps, LifePoints, Lifetimes or Stepping Stones.

Adjusting with age

Typically with “life stages” funds, the investments you hold automatically adjust as you age, and the percentages of riskier things like shares and property decrease as you get older.

Because these “growth assets” have more ups and downs, it makes sense to hold less of them at the time you need your money back. You don’t want the value of your investments to suddenly tank right when you’re about to retire.

When it’s time to ease up working, you’ll be holding mostly “income assets” like bonds and cash. These can generally be relied upon – although they won’t grow as much – to provide a steady stream of money to live off.

For example, with life stages options you would typically at age 20 have anywhere from 80% to 100% invested in shares and property. By age 65, you would have gradually scaled back to somewhere between 0% and 50% of those riskier growth assets.

The two ways KiwiSaver life stages work

Most life stage options are actually not funds. They are a strategy that feeds your money in defined amounts into two or three different funds, depending on how old you are.

The percentage might change every year, or every five or ten. But gradually, over the years, more and more of your money is automatically funnelled into a fund with income assets.

The KiwiSaver providers that operate this way are AMP, ANZ, Fisher Funds, Funds Administration New Zealand (which runs the Lifestages scheme), Generate, NZ Funds and Smartshares.

There is a second way these life stage options can work, which is to put your money into a single fund for the entire time you’re in it, and that fund adjusts its mix of investments for you over time. So you stay in the same fund, but its strategy changes.

At the moment, for example, Aon has a stack of funds that are made to shift into income assets as they approach their target years: 2025, 2035, 2045, 2055. These are a bit easier to see and compare on the fund finder, although again, what’s in them will change over time.

Are KiwiSaver life stages options for you?

To know whether these are a good fit, the key question is: does the goal of the life stages strategy match your own goals as an investor?

Some options are designed, for example, for someone wanting to take out their entire savings at age 65 and sock it into a cash account with little risk. Others are made for those who want to keep investing throughout retirement and draw down on their funds gradually.

It helps to ask the provider who and what the product was intended for. Is it right for you?