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26 August 21
Reading time: 5 minutes
In financially stressful times like these, our minds quickly run to those piles of money in KiwiSaver. It’s natural to think about tapping into your KiwiSaver.
Yes and no. KiwiSaver is there for long-term investing – to help you buy your first home or fund your retirement when you reach 65. It’s not for withdrawing it whenever you want. But there are circumstances where you can access the money, such as applying under the significant financial hardship option.
“I’m dealing with redundancy, I’ve got people depending on me, I’m just trying to meet personal expenses – that’s what hardship withdrawals are meant to be for, right?”
Definitely. But you want to make sure you exhaust all your other options first. It needs to be a last resort.
Withdrawing now is a big deal, because you miss out on the money that would be yours if you stayed in KiwiSaver. Tens of thousands of dollars could be at stake. (See below.)
So it’s important to not run and do anything hasty. No fear-based, rushed decisions, please.
The response to the COVID-19 crisis includes all sorts of help you can look at before you need to apply for a hardship withdrawal. Use your support system first.
Often there are alternatives out there we don’t even know about, but because our KiwiSaver fund is ours, we turn there first. But ideally you want to understand all the options and make a good choice.
The MoneyTalks helpline gives you access to expert financial mentors via live chat, phone, email or text: moneytalks.co.nz, 0800 345 123, email@example.com or text 4029. You can even speak with them anonymously.
Remember that banks and other financial service providers are willing to work with customers who are struggling financially. This could be by restructuring loans or giving access to short-term credit, for example.
You have a legal right to ask for changes to your loan repayments when you are experiencing unforeseen hardship.
Good Loans is run by Good Shepherd, and these types of loans can even be used for bills and debt to get through, and even by migrant workers. They are a great alternative to high-interest payday loans, for instance.
The government has announced a number of relief packages to help us through the COVID-19 crisis. Have a look to see if any can work for you:
If you’ve lost your job, can’t work at the moment or your income has fallen, you may be able to get a benefit or some other financial help from Work and Income. If you’re struggling to meet living costs or had an unexpected bill, they may be able to help you, even if you’re working. Find more information about financial support from Work and Income or call 0800 779 997 (8am–1am, 7 days a week).
When you’re looking at how much to withdraw, you can run your numbers using our KiwiSaver savings calculator to see how it affects your long-term prospects. Enter your current balance, see what you’re on track to achieve, and then reduce your balance by the amount you want to withdraw. Your final figure will reduce significantly.
To give an idea, let’s say you’re 35 years old and have $22,000 in a KiwiSaver growth fund. If you withdrew $20,000 now, by age 65 you would end up having $74,000 less! That’s a lot to walk away from (even when you adjust for the effects of inflation over that 30 years at 2%, it would still be $41,000 less).
If you’re aiming to withdraw funds from your KiwiSaver to give to someone else, particularly someone you’ve never met in person, make sure you’re not the target of a scam. A crisis like the one we’re in brings out the worst in some people, and there are frauds out there exploiting the effects of COVID-19. Keep your money safe!
You are generally able to withdraw your KiwiSaver savings if you are experiencing financial hardship. This means you are not able to pay your essential living expenses or your mortgage, suffer from serious illness, or have to pay for medical treatment. It can even be for funeral costs in some cases.
The key thing to know is that significant hardship is for when you are unable to meet everyday expenses like food or shelter – but not to pay any of the following:
You generally can’t take out any government money that has gone into your KiwiSaver for hardship so you’d only be able to take out money from your contributions, your employer’s and your investment returns. You may only be able to take out a specific amount.
After you’ve pursued all your options, contact your KiwiSaver provider directly to apply (or if you’ve been in KiwiSaver for less than three months, contact Inland Revenue).
Withdrawing from your KiwiSaver is a big decision and will shape your future in one way or another, so you want to be sure it’s a smart choice.