Should you withdraw your first-home deposit from KiwiSaver?

Have you been a KiwiSaver member for at least three years? Then your very first step on the property ladder may be closer than you think.

Just like KiwiSaver HomeStart Grants, KiwiSaver early withdrawals are a welcome helping hand for many first-home buyers looking to build their deposit. But before you decide to use this tool, it’s also critical not to let the dream of home-ownership get in the way of your long-term goals – your retirement savings.

Are KiwiSaver withdrawals worth it? Have a read of these tips to learn more.

Young Kiwis have property in mind

According to recent data from Westpac, an increasing number of young Kiwis are joining KiwiSaver to save for their first property.

That was the main reason mentioned by 74 percent of young New Zealanders aged 18-24, compared to 59 percent of Kiwis aged 25-29, and 16 percent of people aged 35 to 54.

At the same time, only 24 percent of 18- to 24-year-olds said they had worked out how much they would need in retirement. Plus, just 44 percent of Millennials said they had a proper understanding of their KiwiSaver scheme, with 12 percent of them admitting they did not know where their money was invested.

The cost of withdrawing from KiwiSaver

With house prices on the high side, and old age probably being less of a priority for people in their 20s, the focus on property shouldn’t be a surprise. But, even at this young age, it’s a good idea not to let planning for the long-term slip through the cracks.

Eligible first-home buyers (click here to read the criteria) can withdraw all but $1,000 from their account. There’s no limitation.

However, the bigger the withdrawal, the greater the impact on your long-term retirement savings could be. This is based on a combination of factors, like your age, the fund you’re in, and the amount withdrawn.

The benefit of owning property

Having said all that, there are valid reasons to consider home-ownership.

Owning your own place can be a great step towards wealth creation and financial security. As time passes, your home’s value may increase and you come to have equity in your home. Plus, once you’ve paid off your mortgage, you’ll free up a great deal of monthly income.

As always, when pondering your options, make sure to take every element into account, including your short and long-term goals.

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