You have just started a new job and your employer has enrolledyou in KiwiSaver.
This is the first time you have been enrolled in KiwiSaver andyou decide not to “opt out”.
You are interested in estimating how much your KiwiSaver fundcould be worth when you retire.
You make the following assumptions:
• You have just turned 30 and will retire in exactly 35 yearswhen you are 65.
• Your salary is $50,000 this year andyou expect this to increase by 3% every year.
• You can choose to contribute either3% or 8% of your salary into your KiwiSaver fund each year.https://www.kiwisaver.govt.nz/already/contributions/you/amount/
• Your employer must contribute 3% ofyour pay into your KiwiSaver fund each year.https://www.kiwisaver.govt.nz/already/contributions/employers/ Youcan ignore any tax implications and assume your account receivesthe full 3%. (KIWI SAVER ACC)
• You will be entitled to the annualmember tax credit of $521.43 which will be credited into yourKiwiSaver fund at the end of every year.https://www.kiwisaver.govt.nz/new/benefits/mtc/
• Your KiwiSaver fund will invest in adiversified portfolio of assets to earn a return on yourinvestment. Of course, there is uncertainty around the actualannual rate of return that your fund will earn over the 35 yearsbut you decide that 6% and 12% represent a good range of potentialrates of return to conduct your analysis on.
• Regardless of the return earned, themanager of your KiwiSaver fund will charge a management fee of 1.0%at the end of each year, based on the opening balance of your fundeach year.
• You will make no withdrawals oradditional contributions (other than those mentioned above) to yourfund until you retire in 35 years.
• For simplicity, assume that allcontributions to your KiwiSaver fund are made once per year, at theend of the year. The first lot of contributions will be made in oneyear from today.
Construct a spreadsheet that willallow you to answer the following questions on Canvas.
It is calculated that your expected annual salary when you are45 years old is $77,898
- How much will be in your KiwiSaver account at the start of thatyear if you contributed 3% of your salary and the fund earned6%p.a.?
