Professional Investment Services

The mortgage or KiwiSaver?

The mortgage or KiwiSaver?

It All Depends

I read the following article earlier in the week and in some context I agree with it but I also believe that they actually over simplify the message.

I would answer the question in a much different way, in a way that a real Financial Planner should answer the question and that is “It all depends”.

You see an investment should not just be taken on it’s merits standing out on it’s own. An investment should be taken in to consideration while weighing up the goals, time horizon and risk profile of the client asking the question.

You see for some people it could make more sense to pay the money off the mortgage, I don’t know that for sure because the calculations used to compare between the two would depend on the mortgage the questionnaire had.

So basically I agree but with the caveat thrown in that it all depends.

Kiwi Saver or The Mortgage

The Reserve Bank is expected to increase the official cash rate again tomorrow (They did) putting more pressure on mortgage holders budgets.

But should you cut your KiwiSaver contributions and divert the money into paying for higher loan costs?

Absolutely not, if you can afford it, says Nigel Tate, a Waikato based financial adviser and president of the New Zealand’s Institute of Financial Advisers.

“For employees it’s a no brainer to keep going with KiwiSaver,” he says.

That’s because of the employer’s minimum 3 per cent contribution which means you are getting close to a 100 per cent return on your 3 per cent contribution before the money is even invested.

And then there is the government’s contribution on top of that – a $521 annual top up as long as you invest at least $1043 a year.

The official cash rate has already risen from 2.5 per cent to 3 per cent pushing floating mortgage rates to around 6.25 per cent.


The mortgage or KiwiSaver? – Financial Gain | Financial Gain.