For many New Zealanders, KiwiSaver isn’t just about retirement – it’s also the key to buying a first home. Thousands of people every year make a first-home withdrawal, using their KiwiSaver savings to boost their deposit. But here’s the catch: the KiwiSaver fund you choose can make a big difference to how much money you actually have when it’s time to buy.
Volatility & risk – an important factor for first-home buyers
Different fund types come with different levels of risk, and risk typically has a trade-off with returns over the long term.
A more aggressive fund (known as a growth fund) typically has the highest potential for gains. But it’s also riskier and more volatile, especially in the short term.
Think of a line on a graph trending upwards, but with significant peaks and valleys on the way. It’s not a smooth line, but the long-term trend goes upwards.
History shows that in the long term, an aggressive fund has potential for higher returns than a more conservative fund. The conservative graph line would be smoother, with fewer ups and downs, but it doesn’t typically trend upwards at such a high rate.
This principle is illustrated in the graph below. (Note that this is a very general example of the concept, it does not depict actual returns of any fund.)
Simply put, if you’re in it for the long haul, you can generally afford to take on a little more risk but if you need your money much sooner, you’re likely better off taking less risk.
What is the best type of KiwiSaver fund for first home buyers?
For first-home buyers planning to withdraw in the next three years, a more conservative KiwiSaver fund is usually best. More conservative funds reduce the risk of sudden market drops eating into your deposit.
A different timeline for first-home buyers
If you’re saving for retirement, and you’re still only in your 20s, 30s, or 40s, you’ve got decades ahead of you and plenty of time to ride out the ups and downs of the share market and benefit from long-term growth.
But first-home buyers usually only save in a KiwiSaver account for a shorter timeframe – typically 3 to 7 years before they need their money. That shorter horizon changes the game completely and makes fund choice much more complicated.
KiwiSaver growth funds vs conservative funds
Growth funds invest heavily in shares. Over the long run, that generally means higher returns – but also bigger swings in value from year to year.
If you’re planning to withdraw soon, those swings could be costly. Imagine you’re set to buy your first home next year, but the market suddenly drops 10%. That could potentially mean thousands of dollars less in your KiwiSaver account right when you need it most.
By contrast, conservative funds hold more cash and bonds, which tend to be much more stable. Returns may be lower, but the trade-off is peace of mind and certainty.
Switching back after your first-home withdrawal
Made it into your first home? Congratulations. Now the story changes. Your next big KiwiSaver milestone isn’t a few years away. If you’re still in your 20s, 30 or 40s – it’s decades away.
That’s when growth funds usually make more sense again. If you have 30–40 years to invest, your KiwiSaver account has time to smooth out short-term bumps and benefit from higher long-term growth. Switching back to a growth fund after your first home purchase can make a big difference to your eventual retirement balance.
Why reviewing your fund choice matters
KiwiSaver isn’t a ‘set and forget’. The best fund for you depends on your goals, appetite for risk and your timeline, and those change as life changes.
Later on, when you’re getting close to 65 (or older, if you intend to withdraw past that age), you’ll need to think about switching to a more conservative fund. It’s a journey.
At Generate, we see firsthand how powerful the right advice can be. Our members can talk with advisers to help them feel more confident about their KiwiSaver account balances and a clearer plan for both their first home and their retirement.
The bottom line
• If you’re planning a first home withdrawal soon: Conservative funds can help protect your deposit from market volatility.
• If you’ve just bought your home: Growth funds usually give your retirement savings the best chance to grow over the long term.
• If you want more guidance: Talk to an adviser – switching KiwiSaver funds at the right time can make all the difference.