A self-employed reader in their early sixties ask whether KiwiSaver makes sense, and if so what fund and how much to contribute.

Q) I am self employed in my early 60s.  What would be my best options for getting involved in Kiwisaver and obtaining maximum advantage?
e.g. how much to contribute?  What type of fund? I will not be totally reliant on Kiwisaver funds for support during retirement.

A) Thanks for your question. I'll remind you that we are not allowed to give personalised financial advice as journalists. That said, we do have the benefit of having an authorised financial advisor on staff. Craig Simpson is our senior analyst here at interest.co.nz. In the video above, I asked Craig whether in his opinion it made sense to go into KiwiSaver given your employment status and age. Given the fact that you can still receive the $1,000 kick-start as well as a potential $521 a year in tax credit if you make a minimum payment of $20 a week (for a total of  $1,043) it was his belief that yes, KiwiSaver did make sense as an add-on to retirement savings plan.

As a self-employed person, you have a bit more flexibility than a PAYE employee in terms of how much you contribute, Craig notes. So you can pay  a lump sum amount or on a regular basis. That may be of interest and comfort to you if your business revenues are lumpy.  You can elect to wait until just before the end of the year cut-off before putting in the required minimum amount ($1,043) and still receive the government contribution. 

You might wonder if it makes sense to pay more than the minimum required to receive the full member tax credit entitlement. Craig didn't think so.

"Why put in more than you have to to get the full government pay-out", he said.

What's less certain, is the type of fund you should be invested in. (To see a full list of KiwiSaver options and their profiles click here).

With potentially only a few years invested in KiwiSaver, chances are you don't want to take any unnecessary risks with your money and therefore a conservative fund makes most sense. That said, given extended life expectancy these days, many financial advisors suggest that a higher allocation of equities in your portfolio may be necessary to generate sufficient returns to see you through retirement. So it's possible a balanced fund (which would have a higher exposure to growth assets) may be better suited to your needs. It would depend on your appetite for risk, your current liabilities ( ie. debts) and the other retirement investments that you alluded to. A financial advisor would be best placed to advise you given a review of your circumstances in whole.

Risk and return

"You can't generalise that just because you are getting more mature that you should be any less risk adverse or more risk adverse. You could go the aggressive route and say 'Let's try for the next four-five years to maximise returns' but you balance that off against risk. I'm a bit more cautious. I've been in the markets a long time and have seen the destruction it can cause so I tend to lean toward the more conservative side. This person says they aren't totally reliant on KiwiSaver which says to me 'It would be nice to have my capital there.'

"You also have the chance to have a bit more fun, have some equities in there as well so that conservative to balanced option may be appropriate but that's where a financial advisor would come in and assess the whole criteria of risk and return and what you are looking to achieve and your total financial situation.''

"You've got to take some risks to build up that asset base. In the same vein, you can't necessarily take that much risk if you're reliant on the money. So you're caught between a rock and a hard place."

Additional considerations for you are how much you'll be paying in fees on your KiwiSaver, and other investment options outside of the scheme.

"So you have that core component that is your set and forget, your rock for your trouble times, and then have a bit more fun on the side. Talk to a broker, a financial advisor, get good advice."

Considerations for retirement

• Where does KiwiSaver fit in the bigger retirement picture? Is it your only retirement saving fund or just a bolt-on addition.
• How comfortable are you with risk, and how much volatility can you afford to stomach?
• What's your timeframe for investing?
• What's your desired lifestyle in retirement? How much will you need?
• Do you want to consume your capital or preserve it?
• What are you fees in KiwiSaver all up?
• Are you likely to receive any inheritances?
• Will you be making any "one-off" major expenditure (e.g. buy a new car, travel etc)