A 12 per cent paycheck contribution to a savings investment scheme is “not far off” the ideal amount needed to meaningfully break even or beat inflation long-term and feel wealthy in retirement, according to a KiwiSaver expert.

Milford Asset Management’s head of KiwiSaver Murray Harris told Markets with Madison that while the ideal contribution rate varied for every investor, it was likely much higher than the current average amount.

“The problem we’ve got with KiwiSaver … most people are only contributing 3 per cent.

“Most successful superannuation systems around the world … have contribution rates of around 10 per cent of individual earnings.”

With the taxed employer-matched contribution, most savers were shuffling away 5 per cent of their income, Harris said.

According to Milford analysis, a 35-year-old worker earning $55,000 annually, with $20,000 in their KiwiSaver already and contributing 3 per cent of their paycheck to a balanced fund with an average 6 per cent return, would have about $600,000 by the retirement age of 65.

If that saver contributed more, or switched to a growth fund, the retirement sum swelled to as much as $1 million, according to the analysis.

“For most people, they would consider themselves wealthy.”

However, that model was not adjusted for inflation, which was above 7 per cent at the beginning of 2023.

Harris had a larger concern than inflation, which he said could wipe hundreds of thousands of dollars off retirement savings accounts in the long term – find out what it is in this interview on Markets with Madison.

Get investment analysis and insights from the experts on Markets with Madison every Monday and Friday on the NZ Herald website.

Disclaimer: The information provided in this programme is of a general nature, and is not intended to be personalised financial advice. We encourage you to seek appropriate advice from a qualified professional to suit your individual circumstances.