This article was published on 8 November 2019. Some information may be out of date.

If you can learn to handle risk, you’ll get more out of your KiwiSaver fund

Ask someone which KiwiSaver fund they are in, and most will name their provider — a bank or other financial institution. But the provider doesn’t matter nearly as much as which type of fund you’re in.

The choices, listed from low-risk to higher-risk, are:

  • A defensive fund that invests largely in bank deposits.
  • A conservative fund — mainly bank deposits and bonds.
  • A balanced fund — roughly half bonds and half shares.
  • A growth fund — mostly shares.
  • An aggressive fund — pretty much all shares, perhaps with a bit of commercial property.

Which is best? That’s the decision faced by a 56-year-old teacher we’ll call Michelle.

“Due to a marriage breakup, I am only now onboard with putting 3% of my salary into KiwiSaver,” she writes. “Which fund should I invest in given my age and late start? I will work till 65 then relief teach for a few years, if possible.”

Your choice of KiwiSaver fund depends on two factors:

When you expect to spend the money, and how well you can cope with seeing your balance go up and down.

Ideally, if you expect to spend your savings:

  • Within three years, choose a low-risk defensive or conservative fund.
  • In three to ten years, choose a balanced fund.
  • In more than ten years, go with a growth fund or aggressive fund.

This means the money you’ll be spending soon is secure. The balance might fluctuate, but only a little.

The medium-term money will fluctuate somewhat more. But you’ve got at least three years before you withdraw it — enough time for your savings to recover from a downturn. And it’s likely to grow faster than in a low-risk fund.

What about the longer-term money? In a higher-risk fund it’s more volatile. Occasionally, the balance could halve. So why on earth would Michelle — or you — want to expose yourself to that?

Higher-risk KiwiSaver funds have higher average returns — the interest, dividends and so on earned in your account each year. And higher returns make a huge difference to how much you’ll have in retirement.

For example:

An employee aged 35 earning $60,000 and contributing 3% to KiwiSaver might have about $200,000 at 65 in a defensive fund. But in an aggressive fund it might be $360,000 — almost twice as much. For an 18-year-old, the difference would be even bigger.

At Michelle’s age the difference at 65 won’t be so dramatic. But it’s important to realise that she won’t spend all her KiwiSaver money then. Some might last until she’s 95 or older!

If she can cope with volatility — an important “if” — she should put the money she expects to spend later in retirement in a growth or aggressive fund. The rest should go in a balanced fund — most KiwiSaver providers will let you use more than one of their funds.

When she’s within three years of starting KiwiSaver withdrawals, she should move her shorter-term spending money to a low-risk fund. Then, as each year goes by, she can transfer more into low risk and more into balanced, to maintain the time horizons listed above.

Note, though, our big assumption:

That Michelle would stay cool if the markets fell, and not panic and switch to a lower-risk fund. A move like that would make her loss real, rather than just a blip that will come right with time.

To test her tolerance for risk, Michelle can answer the three questions at

If the tool suggests she should choose a lower-risk fund, it would be great if instead she learnt how to cope better with risk. She can do that by working through the quick quiz at

Ask Mary

Have a question or concern about saving or investing for Mary? Email [email protected], subject Money. Letters cannot be answered personally. If your topic is chosen you will receive a copy of Mary’s book, Rich Enough? A Laid-Back Guide for Every Kiwi.

No paywalls or ads — just generous people like you. All Kiwis deserve accurate, unbiased financial guidance. So let’s keep it free. Can you help? Every bit makes a difference.

This column is supported by the Financial Markets Authority to encourage women to take an interest in KiwiSaver and investing. Visit for more information. Mary’s views do not necessarily reflect those of the FMA.

Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it.