With over 250 KiwiSaver funds to choose from it is not at all surprising that people are daunted by the prospect of figuring out the right fund to go with. As a result, invariably either you end up in one of the 9 default funds or you go with whichever fund your partner, best friend or favourite colleague at work is invested in. 

Easy, as far as decision making is concerned. Fatal, because of what you may be missing out on.

The fact is, small differences in what you earn from your fund over the following years can have a dramatic impact on how much you end up with when you inevitably end up in retirement. Now that the results for 2018 are out, let’s scratch the surface a bit and dig behind the numbers to see what it all might mean for you.

If you know which fund you are invested in, click here to find an estimate of how much you may have in your KiwiSaver account when you retire. Note, we have had to make a few assumptions that we have explained.

Funds come in different categories such as Conservative, Balanced, Growth etc. depending on how much they are likely to rise and fall in value from year to year (given the type of assets they invest in). On that spectrum, conservatively invested funds will have smaller swings in earnings from year to year than balanced funds which invest in slightly more volatile types of assets.

Let’s assume you are in the middle-of-the-road category of Balanced funds. On average, these group of funds have earned about 8% year on year (after fees) over the past 10 years, a reasonably long time frame (given KiwiSaver has been around for only 11 years!).

What an 8% earning means is that for someone on a $70,000 a year salary, contributing 3% over the last 10 years is about $64,000 in their KiwiSaver account today. 

But, averages can be misleading. Within the category of Balanced funds the best performing fund earned just over 10% year on year and the lowest earning fund about 6%. How does that translate to dollars today for someone saving up over the last 10 years?

If you were in the higher performing fund above that would mean a balance of $72,000 and in the other fund a balance of $57,000. That’s a whopping $15,000 difference in fortune over just 10 years.

If that doesn’t feel like much over a 10 year period, consider that if the same differentials in earnings continued on, for a 30 year old, the difference when they retire is between $1.2 million vs. $485,000 – that’s an eye-popping benefit of $715,000!

So…..do you know which KiwiSaver fund you are in? Find out more about your KiwiSaver fund here.

The post Spoilt for choice, but are you missing out on big dollars? appeared first on PocketWise.