So, you’ve decided it’s time to switch your KiwiSaver provider. This can be a great step toward achieving your savings goals, but it’s important to consider the risks involved before making that commitment. Let’s explore some common pitfalls to watch out for.

1. Choosing the Wrong Fund

Not all funds are created equal. Different funds have different risk profiles, investment strategies, and fee structures. If you pick a fund that doesn’t align with your risk tolerance or retirement goals, you could end up with disappointing returns. Do your homework: understand what types of assets your new fund invests in and how that fits into your overall strategy. If you’d like to learn more about different funds, have a read of our KiwiSaver Fund Type guides.

2. Choosing the Wrong Provider

Each KiwiSaver provider has its strengths and weaknesses. Some might have great customer service, while others offer ethical options or strong investment performance. Switching providers without thorough research could negatively affect your financial future. Make sure to compare factors like fees, performance history, and investment options before making the leap. Take a look at our Comparing Fund Performances and Evaluating KiwiSaver Providers guides for some great tips.

3. Chasing Highest 1-Year Returns

It’s tempting to jump ship for a provider that’s boasting impressive one-year returns. However, chasing short-term performance can be risky. Markets fluctuate, and what looks good today might not perform well tomorrow. Instead of focusing solely on recent returns, evaluate a provider’s 3, 5 and 10 year track record and investment strategy.

4. Changing Too Often

Frequent switching can be counterproductive. If you change providers every time your fund experiences a dip, you risk missing out on potential gains. Plus, every provider has different performance patterns; moving around can make it hard to stick to a long-term investment strategy. Consistency often yields better results over time.

Use a Third-Party Advice Service

Navigating the KiwiSaver landscape can be confusing. A good advisor can help you understand your options and guide you toward the best choices for your situation. Don’t go it alone if you’re unsure!

Conclusion

Switching KiwiSaver providers can seem like a straightforward way to improve your retirement savings, but it comes with risks that shouldn’t be overlooked. Take the time to research funds and providers, consider long-term implications, and don’t hesitate to seek advice. A well-thought-out decision today can lead to a more secure financial future. Happy saving!