10 Common KiwiSaver Mistakes Costing Kiwis Thousands
Most New Zealanders make at least one of these KiwiSaver mistakes—and each can cost tens of thousands of dollars by retirement. The good news? They're all easily fixed. Learn what the most common errors are, how much they cost, and exactly how to avoid them starting today.
1. Staying in the Default Fund
High CostThe Mistake: When auto-enrolled, you're often placed in a conservative default fund designed to be low-risk. If you're young (under 50), this is too cautious and severely limits your growth potential.
The Cost:
A 30-year-old in a conservative fund (5% return) vs. growth fund (9% return) could miss out on $300,000+ by retirement. That's the difference between a comfortable retirement and struggling.
The Fix:
Log into your KiwiSaver provider's website or call them. Switch to a growth fund if you're under 45, balanced if you're 45-60, or conservative only if you're 60+ or buying a home within 5 years. Takes 5 minutes, could change your retirement.
2. Ignoring Fees
High CostThe Mistake: Thinking "fees are just 1%, that's nothing" without realizing how they compound over decades. Many people never even check what they're paying.
The Cost:
A fund charging 1.5% fees vs. 0.4% fees costs you approximately $89,000 over 30 years on a $50,000 balance with ongoing contributions. That's literally paying for someone's luxury car with your retirement money.
The Fix:
Check your annual statement for "total annual fund charges." If it's above 1%, especially for passive funds, switch to a low-cost provider like Simplicity (0.31%) or Kernel (0.27%). Use our fees calculator →
3. Contributing Only 3%
Medium CostThe Mistake: Sticking with the minimum 3% contribution to get the employer match, thinking that's "enough." While 3% is better than nothing, it rarely provides sufficient retirement income.
The Cost:
Contributing 3% vs. 6% over 35 years could mean $178,000 less at retirement. That's the difference between $7,120/year vs. $14,240/year in retirement income (4% rule).
The Fix:
Increase to at least 6% if you can afford it. Can't afford 6%? Start at 4%, then increase 1% each year or with each pay rise. You'll barely notice the reduction in take-home pay, but your retirement balance will thank you.
4. Never Reviewing Your Fund
High CostThe Mistake: Setting up KiwiSaver once and forgetting about it for 10, 20, or 30 years. Your needs change, better providers emerge, but you never review.
The Cost:
Staying with an underperforming fund or high-fee provider for your entire career could cost $50,000-$200,000 depending on the gap between your fund and better alternatives.
The Fix:
Set an annual calendar reminder (ideally on your birthday) to review your KiwiSaver. Check: Are fees still competitive? Is performance on track? Does fund type still match your age and goals? Compare providers annually →
5. Wrong PIR Tax Rate
Medium CostThe Mistake: Not updating your PIR (Prescribed Investor Rate) when your income changes. If your PIR is too high, you're overpaying tax on investment gains. If too low, IRD will charge you at year-end.
The Cost:
Being on 28% PIR when you should be on 17.5% could cost you $5,000-$15,000 over a career, depending on your balance. It's literally paying 10.5% extra tax unnecessarily.
The Fix:
Check your PIR rate with your provider annually. If your income dropped (e.g., parental leave, career change), you may be able to lower your PIR to 17.5% or 10.5%. If income increased above $48,000, ensure you're on the correct rate to avoid IRD penalties.
6. Panic Selling During Market Downturns
Variable CostThe Mistake: Watching your balance drop 15-20% during a market crash and switching to a conservative fund to "stop the bleeding." This locks in losses and misses the recovery.
The Cost:
During the 2008 financial crisis, those who sold locked in 30-40% losses. Those who stayed in growth funds recovered fully within 3-4 years and went on to make massive gains. Panic selling during COVID-19 in March 2020 would have meant missing the 40%+ recovery by year-end. Cost: $30,000-$100,000+ depending on balance.
The Fix:
If you have 10+ years until retirement, stay in your growth fund during downturns. Markets always recover—historically, they're higher 10 years later 100% of the time. Only switch to conservative if you need money within 5 years or you're approaching retirement age.
7. Not Maximizing Member Tax Credit
High CostThe Mistake: Not contributing enough to get the maximum $521.43 annual government contribution. You need to contribute $1,042.86/year (about $20/week) to get the full match.
The Cost:
Missing out on the full $521.43 annually for 35 years means losing $18,250 in free government money plus all the compound growth on it (potentially $50,000+ total). That's literally leaving free money on the table.
The Fix:
If employed: 3% of a $35,000 salary meets the threshold. If unemployed or self-employed: Make voluntary contributions totaling $1,042.86/year. Set up automatic payments of $20/week or $87/month to guarantee the full government match.
8. Not Understanding First Home Withdrawal Rules
Medium CostThe Mistake: Planning to use KiwiSaver for a first home but not understanding the rules: 3-year minimum membership, must intend to live there 6+ months, income and house price caps apply, can't withdraw the $1,000 kick-start.
The Cost:
Missing out on the First Home Grant (up to $20,000 for new builds) because you didn't meet requirements. Or withdrawing for a home, then having 30+ years of reduced retirement savings starting from a lower base.
The Fix:
Research requirements early. Ensure you meet the 3-year minimum. Apply for both KiwiSaver withdrawal AND First Home Grant. After buying, restart aggressive contributions and switch to growth fund to rebuild for retirement.
9. Taking a Contributions Holiday and Forgetting to Restart
Variable CostThe Mistake: Taking a contributions holiday (stopping your own contributions) for legitimate reasons but forgetting to restart. Years pass without contributions while you think you're still saving.
The Cost:
A 3-year contributions holiday on a $60,000 salary at 6% contributions means missing $10,800 in personal savings, plus employer match (~$5,400) and government contributions (~$1,564). Total: $17,764 plus all future growth on that money (potentially $50,000-$80,000 by retirement).
The Fix:
Set a calendar reminder when you take a contributions holiday to restart after the intended period. Check your payslip monthly to confirm contributions are deducted. Log into your provider quarterly to verify employer contributions are coming through.
10. Having Multiple KiwiSaver Accounts
High CostThe Mistake: Accidentally opening multiple KiwiSaver accounts (e.g., getting auto-enrolled with each new job) and not consolidating them. Each account charges fees, and small balances often underperform.
The Cost:
Having 3 accounts means paying 3x the administration fees (potentially $90-$150/year instead of $30-$50). Over 30 years, that's $1,800-$4,500 in unnecessary fees, plus the lost growth on that money.
The Fix:
Check if you have multiple accounts by logging into myIR or contacting IRD. Choose your preferred provider and consolidate all other accounts into it. This is free and takes about 2 weeks. You should only ever have ONE active KiwiSaver account.
The Total Cost of These Mistakes
If you're making even 3-4 of these mistakes, you could be leaving $100,000-$300,000 on the table by retirement. The good news? Every single one is fixable, and most take less than an hour to address.
Your Action Checklist:
Taking action on these today could literally add six figures to your retirement fund. Don't wait—start now.
Fix These Mistakes Today
Use our comparison tools and calculators to optimize your KiwiSaver and avoid these costly errors.