The math behind the money

Why after fee returns are key to KiwiSaver success

By Scott Crocker

Choosing the right KiwiSaver fund can have a significant impact on your retirement savings. While fees are an important consideration, "after fee returns" are equally crucial. In this article, we'll take a look at the importance of after fee returns and why you should pay attention to them when choosing a KiwiSaver fund.

1.       After fee returns represent the actual returns you will receive after fees have been deducted.

2.       A fund with a lower fee may still have lower after fee returns due to their investment strategy or performance.

3.       Past performance is not a guarantee of future returns and it's important to consider other factors such as the fund's investment strategy and risk profile.

Example:

Let's say you're thinking of investing in two different KiwiSaver funds - Fund A and Fund B.

Fund A charges a fee of 0.5%, while Fund B charges 1%.

After all fees are deducted, Fund A will give you a return of 7% and Fund B will give you a return of 12%.

Although Fund A has a lower fee, Fund B will still return more money in the long run because its return after fee’s is much higher – a net increase of 3.5%

While fees are a necessary consideration when choosing a KiwiSaver fund, after fee returns are equally important. It's essential to consider both factors when making an informed decision about where to invest your money. By paying attention to after fee returns and other relevant factors, you can ensure that you are on track to achieve your retirement savings goals.