A few months back, I wrote an article worried about the number of people using their Kiwisaver retirement funds to buy a house.

It seemed to me that a lot of us were tapping into our Kiwisaver just because we can, and I’m not sure that everyone understands the impact this may have on long term savings.

Well I have recently come across a 2019 report (2024 update - this report has since been removed from the internet) that tells us how many first home buyers are tapping into their Kiwisaver to buy a house.

Approximately 50%. How they came up with the number is not an exact method, but it appears close to the mark.

I would have thought it was closer to 60% or higher based on what I had seen and heard, so was a bit surprised. 50% is still a high number of people withdrawing from their retirement funds though. And this percentage is climbing too.

In my previously linked to article I discussed how much tapping in to your Kiwisaver early can cost you in the long term. But I didn’t mention how else it can cost.

The cost of choosing the wrong Kiwisaver fund

If you are in your 20’s, 30’s and 40’s it is generally best to be in a growth Kiwisaver fund. One that holds a higher percentage of its holdings in riskier assets such as international and local stocks.

*** There are of course exceptions to this. Some people just can’t sleep at night with volatile funds and sometimes personal finance can’t ignore your emotions. You need to be comfortable with your decisions.

For most of us though, growth funds will generally provide us with the best returns for periods of 15 plus years. There is a price to pay for that uncertainty and volatility, but more often than not the reward will be worth the risk over the long term.

If you don’t know what you are investing in, find out now. Otherwise you don’t know how much risk you are taking on and that is worst kind of risk of all.***

Back to my point. For those that want to use Kiwisaver to put towards a deposit on the house you will need to change your fund from growth to conservative or defensive.

Balanced and growth funds are too risky for periods of 5 years or less and you could potentially end up with less than you started with.

If you are within 5 years of buying a house for example, that is 5 years you aren’t invested in a growth fund.

If we use ANZ Kiwisaver as an example, their growth fund has returned 8.61% over the last 5 years after deductions and tax. Their conservative fund has returned 4.28%.

If we assume you have an opening Kiwisaver balance of $50,000 and annual Kiwisaver contributions add up to $4,500 for each of the next 5 years, then this would be your balance after 5 years:

• Conservative fund - $87,215

• Growth fund - $104,588

A difference of $17,373 in just 5 years. All because you had to use your Kiwisaver to buy a house. If you are saving for a house for longer than 5 years, the difference may be even greater.

If after 5 years we re-join the growth fund after buying a house and we didn’t even add another cent for the next 20 years (assuming 6% returns), the difference would be $55,718. One seemingly small change in the type of fund you are in for just 5 years has cost over $55,000. And this doesn’t even consider the amount lost by withdrawing from your Kiwisaver discussed in the previous Kiwisaver article.

Of course the last 5 years could have seen growth stocks go down in price and you may have dodged a bullet. Even still, you then would have missed out on buying 5 years worth of cheaper stocks.

Final Thoughts

If you want to use your Kiwisaver to buy a house then that is great. Home ownership is a great goal to have for most people.

It’s just that I see more and more people using their Kiwisaver without even thinking about the consequences.

The more you use now, the less you will have later. And remember, a house won’t fund your retirement. You need money for that.

If you are confident you will be able to rebuild your retirement savings quickly then great.

Don’t expect professional advice from the internet. Your situation is unique. There is no one piece of advice that suits all.

All I ask is that you do your homework and consider the impacts of such large financial decisions and consider what you may be giving up. If you understand the impact, then your decision will be the right one, whichever way you decide.

If you need KiwiSaver fund recommendations , then get in touch today.

The information contained on this site is the opinion of the individual author(s) based on their personal opinions, observation, research, and years of experience. The information offered by this website is general education only and is not meant to be taken as individualised financial advice, legal advice, tax advice, or any other kind of advice. You can read more of my disclaimer here.