Is tapping KiwiSaver for a first home even a good idea?

It's easy to find details on using KiwiSaver for a first home, but they don't really say whether it's a good idea or not. It's a healthy question to ask.

There are a couple of KiwiSaver-connected programmes that help you use KiwiSaver to buy a home, like the HomeStart grant and the KiwiSaver first-home withdrawal. Using it for a first home has been a feature of KiwiSaver ever since it started.

What do you think?

Let’s run some numbers. Say someone aged 30 has a KiwiSaver balance of $35,000. Using Sorted’s KiwiSaver savings calculator, we can estimate that she could reach close to $321,000 in a balanced fund by age 65 (after fees, taxes and inflation). Here’s a KiwiSaver doughnut:

art 2 

How would things look if she takes out $35,000 from KiwiSaver for a first home instead?

art 02 

At age 65 her balance would be $227,000 instead of $321,000. (She’d likely have paid off her home by then.)

If she waited, at age 40 she might have closer to $86,000 tucked away in KiwiSaver. Using it for a house deposit then would mean she would still arrive at 65 with $149,000.

 art 03

And if she decided at age 50 to make use of the KiwiSaver first home withdrawal option for a deposit, when she might have $157,000, she would still end up with $82,000 in KiwiSaver at age 65.

 art 04

That doughnut’s getting a bit thin! Plugging these numbers into Sorted’s net worth calculator and including the value of a home helps us look into the future and make decisions now.

Why it can make sense

Looking at the current setup in New Zealand to fund people’s retirements, it’s not hard to see why using KiwiSaver towards a home can be useful.

There’s the simple matter of NZ Super, the government pension. This week, on 1 April, the new NZ Super weekly amount will be $411 for individuals and $633 for couples. That’s $21,380 and $32,892 a year, respectively.

Although NZ Super is generous by international standards, those amounts mean it would be hard to cover housing costs along with all the other everyday expenses in retirement.

Many people’s mortgage or rental payment is even more than that full amount. So it helps to be mortgage-free before hitting retirement, and using KiwiSaver for a first-home deposit can help us get there – especially early on, like our 30-year-old.

If we withdraw from KiwiSaver earlier as a first home buyer, we have less to put toward the purchase and a bigger mortgage. But if we withdraw at 50 and it’s not enough to buy a house outright, we may end up still having a mortgage at 65 and not so much in KiwiSaver.

Of course, fewer of us are jumping on the property ladder these days, but at least we’ll have more in KiwiSaver to rely on than those who tap theirs for a housing deposit. All that time to compound returns should help.


Comments (12)

Gravatar for Jack


8:27am | 8 Sep 2018

Your examples above just don't show the real world. Your words would suggest more in Kiwisaver is better? But the numbers suggest buying a house early is best, can't argue with that. But waiting to buy for 10 or 20 years seems very odd, no account is made for the rent you'll pay while waiting, the increase in house price, the decrease in value of your dollars that no government has ever addressed, etc. It would be a lot more productive giving a list of reasons to not wait at all. NZ's poor policies has already put us in the most depressing state where wealthy immigrants have driven house prices to the point that this is the last generation that young Kiwis will ever be able to buy a first home. Don't wait another minute, if you can't afford a house now, you never will. It's already out of reach for the majority unless you have a wealthy family who can manipulate and get creative around the system to help you. Not to mention the big financial risk family take in doing so if they bow to the banks demands of gifting. Note to Family that want to help, you do not need to gift, see your lawyer first and have them draft an acknowledgement of debt with provision to force a sale for recovery of that debt. Then if things go pear shape you have a chance of recovering something, if you gifted it, it's gone.

Gravatar for Tom


9:15am | 7 Sep 2018

Hi Rachel, thanks for commenting. Have a look here:

Gravatar for Rachel Matheson

Rachel Matheson

11:38am | 6 Sep 2018

The link to Kiwisaver first home withdrawal in paragraph 3 goes to page that no longer exists. Likewise the link to Homestart graph in the same sentence. Please update!

Gravatar for Iain


10:18pm | 3 Feb 2018

First comment. I read the headline and thought "would be nice to read a clear opinion on this issue". I read the article and was underwhelmed by what a poor effort it gave at outlining even the most basic considerations on this issue. The article states it has run some numbers, but this has no credibility when one of the absolute key numbers - interest saved by over the life of the mortgage by increasing the deposit - has been ignored. Yet when questioned on this, Tom was magically ble to state that paying interest when you have savings makes no sense. Why was this comment not included in the body of the article, even if in itself it's a massive the current low interest environment, you would expect a decent kiwisaver to generate a higher % capital growth than the rate of interest you may be paying on your in fact, for some at least, if you can buy without kiwisaver's assistance, there is a chance you may be financially better off.

Appreciate this is a subject which can quickly become stiflingly complex, but failing to address even the most basic parts of the equation results in an article which I'd fundamentally misleading, or, at best, which is simply of no use.

Gravatar for Nick


5:36pm | 17 Dec 2017

Getting a bit of heat on this one Tom!
I actually agree with you. So many of us in New Zealand are obsessed with housing and we sometimes let that cloud our judgment. The least we can do is run the numbers and consider the options. If we do we may see that withdrawing from Kiwisaver early on can have such a large effect due to compounding interest. As other commenters have noted, house prices can double every 10 years, however people often move every 10 years too. Up the ladder into the more expensive market making little progress

Gravatar for Tom


10:06am | 22 May 2017

Cheers Anonymous, here's where to start:
Kind regards

Gravatar for anonymous


11:01am | 21 May 2017

Where could I go for independent and expert advice for my own unique situation?

Gravatar for anonymous


7:56pm | 14 May 2017

It would be helpful to give some options for people who will never own a home on retirement (an increasing demographic) and the different options that they can take with their kiwisaver balance. Thanks.

Gravatar for Tom


11:22am | 30 Mar 2017

Thanks for all the anonymous comments! There's a lot to this, so the more modest point here was to show what withdrawing does to your end balance in KiwiSaver, and to say that there are advantages to being mortgage-free by retirement if you're depending on NZ Super. Yours are points well taken: houses become more valuable over time and drive net worth (although you may want to look at those high expectations); many people's results will vary due to their earning less; and expensive borrowing makes no sense if you've got savings that can be used. Thanks all!

Gravatar for anonymous


7:05pm | 29 Mar 2017

I can't believe that capital gains haven't even been given a mention in this article. When weighing up the pros and cons of this decision, the capital gain over 35 years is the single factor that makes it a no brainer. On average property prices double every 10 years, so if you bought a $500,000 property at age 30 it could be worth 6 million by they time you are 65. Or even at the lower end of the scale $300,000 could be 3.6 million. Even that blows potential gains by leaving it in Kiwisaver out of the water.