Combining KiwiSaver With Your Other Savings in Retirement (NZ, 2026): A Withdrawal Order That Works

How to coordinate KiwiSaver, term deposits, shares and rental income in retirement: which pot to draw from first, PIE tax efficiency, and keeping your risk level right across every account.

This article is general information only and is not personalised financial advice. It does not take into account your particular financial situation, goals or needs. Before acting, consider whether it's right for you and seek advice tailored to your circumstances.

By the time most people reach 65, KiwiSaver is only one of several places their money sits. There is often a term deposit or two, some shares or managed funds, sometimes a rental property or a small business, and underneath it all, NZ Super. Retirement income is less about any single account and more about how you draw from all of them together. This guide explains how the pots fit, which to draw from first, and how to keep tax and risk sensible across the lot.

TL;DR: In retirement your KiwiSaver, term deposits, shares and other savings work as one plan, not separate buckets. KiwiSaver and other PIE funds are taxed at your prescribed investor rate (PIR), capped at 28% ¹, while term deposit interest is taxed at your full marginal rate, up to 39% ³. For many retirees that makes the tax treatment of each pot matter more than the order you spend them in.

Why is retirement about coordinating pots, not just KiwiSaver?

During your working life, KiwiSaver mostly looks after itself. Money goes in each payday, it sits in one fund, and you rarely touch it. Retirement flips that. Now the money has to come back out, usually for 25 to 30 years, and it has to come out of several accounts that each behave differently.

KiwiSaver is large and getting larger. As at 31 March 2025 there were about 3.4 million members and $123 billion under management ⁶, and a growing share of that belongs to people at or near retirement. But KiwiSaver rarely sits alone. Treating it in isolation, separate from your term deposits, your shares and your other income, tends to lead to muddled decisions: cash held in the wrong place, tax paid that did not need to be, or risk that is either too high or too low once you add everything up.

Coordinating the pots means looking at total income, total tax and total risk across every account at once. That is where the useful decisions live.

What income sources do most NZ retirees actually have?

Most retired New Zealanders draw on some mix of the sources below. Each is taxed differently and each plays a different role, which is exactly why coordinating them matters.

Figure (described): a table titled "Where retirement income comes from — and how each is taxed", listing NZ Super, KiwiSaver/PIE drawdown, term deposit interest, share dividends and PIEs, and rental income, each shown against its tax treatment and its typical role as floor, buffer or growth. Tax treatment per Inland Revenue ¹³.

NZ Super does the heaviest lifting for most people. For a single person living alone, it pays $1,076.84 per fortnight after tax on the M code — about $27,998 a year ⁴. For a couple where both qualify it is $1,656.68 per fortnight combined, roughly $43,074 a year ⁵. Your savings only have to fund spending above that floor.

Which pot should you draw from first — and why does order matter less here than overseas?

A lot of retirement-drawdown advice online is American, and it leans heavily on getting the order of withdrawals right to manage tax. In the United States, money in different account types is taxed very differently on the way out, so the sequence genuinely changes your lifetime tax bill.

New Zealand is simpler. We have no tax on KiwiSaver withdrawals themselves, no separate capital gains tax on most long-held investments, and no required minimum withdrawals forcing money out at a set age. Once you are 65 and eligible, your KiwiSaver is yours to draw however you like. So the rigid "spend this account, then that one" sequencing that dominates overseas guides matters far less here.

What does matter is more practical:

• Don't sell growth assets at a loss to fund everyday spending. Spend from cash and term deposits during a downturn so your KiwiSaver and shares have time to recover. This is the core idea behind the bucket strategy for retirement income.
• Keep enough liquid. Term deposits ladder and mature; a rental can take months to sell. Make sure the next year or two of spending is in something you can actually reach.
• Mind the tax treatment of each dollar, which in NZ is usually a bigger lever than withdrawal order. That is the next section.

For most retirees, the better question is not "which account first?" but "where should each type of money sit so tax and risk are right?"

How does PIE/PIR tax affect whether to spend KiwiSaver or term deposits first?

This is where New Zealand's rules create a real, usable difference.

KiwiSaver and most managed funds are portfolio investment entities (PIEs). The income they earn is taxed at your prescribed investor rate (PIR) — the tax rate on your PIE earnings — which is 10.5%, 17.5% or a maximum of 28% ¹. From 1 April 2025 the bands are: 10.5% if your taxable income is $15,600 or less (and taxable plus PIE income is $53,500 or less); 17.5% up to $53,500 taxable (and $78,100 combined); and 28% above that ².

Term deposit and bank interest is different. It is ordinary income, taxed at your full marginal rate with resident withholding tax (RWT) taken at source, and the top personal rate is 39% on income over $180,000 ³. Crucially, the PIE rate is capped at 28% while ordinary income tax keeps climbing to 39%.

What that means in practice:

• A retiree on a higher marginal rate keeps more of each dollar earned inside a PIE than from the same dollar of term deposit interest, because the PIE caps out at 28% ¹³.
• For someone on a low income in retirement, the gap narrows or disappears, and a 10.5% or 17.5% PIR may sit close to their ordinary rate.
• This is about the return each pot earns, not the act of withdrawing. Taking your own capital out of KiwiSaver is not taxed again.

A common implication is that money you want kept growing and tax-efficient often suits a PIE structure, while the safe cash you hold for the next year or two sits in term deposits regardless of the slightly higher tax — because its job is stability, not return. Whether that is right for you depends on your PIR, your other income and how much cash you need on hand. Our guides on how PIE tax works and what PIR you should be on go deeper, and it is worth checking you are on the correct PIR, since being on the wrong one is common.

Where should you hold your cash buffer versus your growth money?

A simple way to organise the pots is by when you will spend the money, not by which provider holds it.

• Cash buffer (next 1–2 years of spending): term deposits, on-call savings, an emergency fund. The job here is to be there in full, whatever markets do, so you are never forced to sell investments at a bad time. The slightly higher tax on interest is the price of that certainty.
• Growth money (10+ years away): KiwiSaver growth or balanced funds, shares, non-KiwiSaver managed funds. This is where the PIE cap helps and where you accept that values rise and fall.
• The middle: balanced funds, bond funds and longer-dated term deposits bridge the two, refilling the cash buffer over time.

The point of coordinating across accounts is that you don't need each account to hold all three layers. Your term deposits can be the whole cash buffer; your KiwiSaver and shares can be the whole growth layer. What you want to avoid is the common mismatch of keeping years of spending sitting in a growth fund (where a downturn could force a bad sale) or, the opposite, holding your entire nest egg in cash where it slowly loses ground to inflation over a long retirement.

Returns are not guaranteed. The value of investments can go down as well as up and you may get back less than you invested. Past performance is not a reliable indicator of future performance.

How does rental or business income change the picture?

A rental property or a small business in the mix shifts two things: your income and your liquidity.

On income, net rent and business profit are taxed at your marginal rate, up to 39% ³. If that income, on top of NZ Super, pushes your total higher, it can lift the PIR band you fall into ² and means more of your other income is taxed at higher rates. It is worth working out your expected total taxable income for the year before assuming which PIR applies.

On liquidity, property and a business are far less accessible than a term deposit or a fund. You cannot sell a spare bedroom to cover three months of bills. So a retiree with a chunk of wealth tied up in a rental usually needs a larger, more deliberate cash buffer elsewhere, because that asset cannot be drawn down in small, regular amounts.

Property and business decisions also reach into areas we do not advise on. Smiths Financial does not provide advice on property investment, business structuring or tax. This is general information only — please consult an appropriately authorised professional, such as an accountant or a property specialist, for those parts of your plan.

How do you keep your overall risk level right across all accounts?

People often set the risk level of each account in isolation, then never look at the whole. That is how you end up accidentally too conservative or too aggressive overall.

The fix is to add it all up. Look at your total savings across KiwiSaver, shares, funds and term deposits, and work out what share of the combined total is in growth assets (shares and property) versus income assets (bonds and cash). That single percentage is your real risk level, not the label on any one fund.

A couple of things commonly surprise people when they do this:

• A "growth" KiwiSaver fund can be more than offset by a large pile of term deposits, leaving the whole portfolio quite conservative once combined.
• Or the reverse: a balanced KiwiSaver fund plus a share portfolio plus a rental can add up to far more growth-asset exposure than someone realises, and more volatility than they are comfortable with in retirement.

You can check the growth-versus-income split of specific funds on Sorted's Smart Investor, then add your term deposits and other holdings to see the full picture. The right overall mix depends on how much of your spending NZ Super already covers, how long your money has to last, and how much market movement you can sit through without losing sleep.

What does a simple annual drawdown review look like?

You do not need to touch this monthly. Once a year, or after a big market move, is enough. A straightforward review runs roughly like this:

1. Confirm your floor. Check the current NZ Super rate for your situation ⁴⁵ and how much of your spending it covers.

2. Total up the pots. List KiwiSaver, shares, funds, term deposits and any rental or business income in one place.

3. Check the cash buffer. Is the next one to two years of self-funded spending sitting safely in cash and term deposits?

4. Check the tax settings. Confirm you are on the correct PIR for the year ahead ², especially if rental or other income changed your total. The wrong PIR is a common, fixable leak.

5. Check the overall risk mix. Add up growth versus income assets across every account and decide if it still suits you.

6. Decide where to refill from. In a normal or strong year, top the cash buffer back up from growth. In a poor year, spend from cash and leave growth alone to recover.

Done once a year, this keeps the whole structure coordinated rather than letting each account drift on its own. Our guide to KiwiSaver decumulation and drawdown covers the mechanics of setting up a regular KiwiSaver withdrawal as part of that plan.

KiwiSaver is a long-term savings scheme. Government contributions, contribution rates, withdrawal rules and tax (PIR) settings are set by the Government and can change. Figures are correct as at 3 August 2025. Check current rules at ird.govt.nz, kiwisaver.govt.nz and sorted.org.nz, and the relevant scheme's Product Disclosure Statement.

Frequently asked questions

Should I spend my KiwiSaver or my term deposits first in retirement? There is no single right order in New Zealand, because KiwiSaver withdrawals are not taxed and we have no required minimum withdrawals. The more useful guide is to spend from cash and term deposits during market downturns so your KiwiSaver and shares can recover, and to keep the next year or two of spending liquid. Tax treatment of each pot usually matters more than withdrawal order — the right approach depends on your circumstances.

Is KiwiSaver taxed more or less than a term deposit? KiwiSaver and other PIE funds are taxed at your prescribed investor rate, capped at 28% ¹. Term deposit interest is taxed at your full marginal rate, up to 39% ³. So a retiree on a higher rate generally keeps more of each dollar earned inside a PIE than from term deposit interest. For someone on a low income, the difference is smaller. Withdrawing your own capital from KiwiSaver is not taxed again.

Do I have to take my KiwiSaver out as a lump sum at 65? No. Once you are 65 and eligible, you can leave KiwiSaver invested, take lump sums when you choose, or set up a regular drawdown into your bank account. There is no requirement to withdraw it at any age and no tax on the withdrawals themselves. KiwiSaver withdrawal rules are set by the Government and can change ².

How much does NZ Super pay, and does it affect my other income? For a single person living alone it is $1,076.84 per fortnight after tax on the M code, about $27,998 a year; for a couple where both qualify, $1,656.68 per fortnight combined, about $43,074 a year ⁴⁵. NZ Super is taxable income, so it counts towards the total that sets your PIR and your tax on other income. Working out your full expected income for the year helps you confirm the right PIR.

Does a rental property change how I should hold my other savings? It can. Net rental income is taxed at your marginal rate, up to 39% ³, and can lift the PIR band you fall into ². A rental is also illiquid — you cannot draw small regular amounts from it — so people with significant property wealth often hold a larger cash buffer in their other accounts. Property and tax advice sits outside our scope, so an accountant or property specialist should help with those parts.

This article is general information only and is not personalised financial advice. It does not take into account your particular financial situation, goals or needs. Before acting, consider whether it's right for you and seek advice tailored to your circumstances. Craig Smith Business Services Ltd (FSP712931), trading as Smiths Financial, holds a Class 2 licence issued by the Financial Markets Authority and is a member of the Financial Dispute Resolution Service (FDRS). Smiths Financial does not provide advice on property investment, business structuring or tax. Written by Henry Smith, Financial Adviser; reviewed by Craig Smith, Principal Adviser. Last reviewed 3 August 2025.