How a KiwiSaver balance is drawn down in retirement (the rate, the timing, and the fund it stays in) affects how long it lasts and how much income it provides. This guide, one of the KiwiSaver withdrawal guides, describes the approaches and the trade-offs.
When Can You Start Drawing Down?
You can withdraw from age 65, with no deadline to start; KiwiSaver at 65 covers access and what changes at 65, and the KiwiSaver withdrawal rules cover every other way to withdraw.
Three Drawdown Approaches
1. Lump sum withdrawal
Withdraw all or most of your balance at once. Pros: simple, and you control the money. Cons: the money leaves the fund, and you decide where to hold or invest it (term deposits, shares and so on), where returns and tax treatment differ.
Common uses: repaying a remaining mortgage, or a major expense such as home modifications.
2. Regular income drawdown
Leave the balance invested in KiwiSaver and set up automatic periodic payments to your bank account. Pros: the remaining balance stays invested in your fund; income arrives on a schedule. Cons: you need to review the withdrawal rate as your balance changes.
Not every provider offers regular withdrawals, and payment frequencies and minimum amounts vary, so check with your provider.
3. Ad hoc withdrawals
Draw money when you need it, with no regular schedule. Pros: flexible; money not withdrawn stays invested. Cons: more decisions to make; easier to overspend or underspend.
This is often used where NZ Super or other income covers day-to-day costs and KiwiSaver covers larger expenses.
Withdrawal Rates
How long a balance lasts depends on how much is withdrawn each year, the fund’s returns after fees, and how long the money is needed.
The 4% rule
The “4% rule” comes from US research suggesting that a 4% annual withdrawal from a balanced portfolio has a high probability of lasting 30 years. It is a rule of thumb, not a guarantee; a lower rate leaves more margin if returns are poor.
Illustrative annual withdrawal amounts by starting balance:
| Balance at 65 | 3% drawdown | 4% drawdown |
|---|---|---|
| $150,000 | $4,500/year | $6,000/year |
| $250,000 | $7,500/year | $10,000/year |
| $350,000 | $10,500/year | $14,000/year |
| $500,000 | $15,000/year | $20,000/year |
These amounts supplement NZ Super (~$28,868/year single, living alone; ~$44,412/year combined for a couple where both qualify, effective 1 April 2026).
The 4% rule assumes the balance stays invested in a mix of shares and bonds. Money moved to a low-interest savings account would not earn the returns the rule is based on.
Fund Type During Drawdown
Fund types differ in how much they hold in growth assets (shares, property) versus income assets (bonds, cash):
| Fund type | Mix | Typical behaviour |
|---|---|---|
| Conservative | Mostly bonds and cash | Smaller ups and downs; lower expected long-term returns |
| Balanced | Roughly half growth, half income assets | In between |
| Growth | Mostly shares | Larger year-to-year swings; higher expected long-term returns |
The trade-off during drawdown is between how much the balance can fall in a bad year and how much it is expected to grow over the years the money is needed. See KiwiSaver fund types explained and fund type by age and time horizon.
The bucket approach. Some retirees hold the next two or three years of planned withdrawals in a conservative fund and the rest in a balanced or growth fund, topping up the conservative portion from the rest when markets are up. Whether you can split a balance across funds this way depends on your provider.
Sequence-of-Returns Risk
The most dangerous scenario for a KiwiSaver drawdown is a major market fall in the first 1–3 years of retirement, combined with regular withdrawals. KiwiSaver in a recession covers how a balance behaves when markets fall.
Example:
- $300,000 balance at 65, in a growth fund
- Market falls 25% in year 1 → balance drops to $225,000
- You withdraw $15,000 (5%) for living expenses → balance $210,000
- Market recovers 25% in year 2 → balance rises to $262,500
- You’re still $37,500 behind where you started, despite the recovery
Withdrawals taken after a fall come from a smaller balance, so the recovery works on less money. That is why the years just before and after retirement are the period when a fall has the most effect during drawdown.
Things That Affect How Long a Balance Lasts
1. Fixed versus flexible withdrawals A fixed dollar amount takes a larger share of the balance after markets fall. Some retirees take a little less after a fall and more after strong years.
2. When drawdown starts Money that stays invested for longer keeps receiving the fund’s returns, positive or negative.
3. Regular reviews Checking the balance, withdrawal rate and fund type each year shows whether withdrawals are running ahead of or behind plan.
4. NZ Super NZ Super is approximately $555/week (single, living alone) or $427/week per person in a couple, after tax, effective 1 April 2026. Check Work and Income for the current rate, as it’s reviewed every 1 April. NZ Super provides a base income; KiwiSaver withdrawals add to it. See KiwiSaver and NZ Super for a full breakdown.
5. The estate Any balance left when you die goes to your estate and is paid out under your will; see what happens to KiwiSaver when you die.
Staying in KiwiSaver vs Moving to Another Structure
Some retirees withdraw their full balance and reinvest it in term deposits, managed funds outside KiwiSaver, or a rental. How the options compare (the tax guides explain PIE tax and the prescribed investor rate):
| Structure | PIE tax advantage | Simplicity | Liquidity |
|---|---|---|---|
| Stay in KiwiSaver | Yes, if the scheme is a PIE (max 28% PIR) | Yes | Yes (withdrawals on request) |
| Term deposits | No (taxed at marginal rate) | Yes | No (locked term) |
| Non-KiwiSaver PIEs | Yes | Yes | Yes |
| NZX shares | Partial (no PIR; dividends at marginal rate) | No | Yes |
| Rental property | No | No | No |
For how withdrawals and investment income are taxed, see Is KiwiSaver taxed at 65?.