Withdrawal Strategy
This page models the most tax-efficient way to fund life after work stops, using the current May 2026 balances and the assumptions in Current Plan.
Starting Position
| Account | Value | Access | Tax Treatment |
|---|---|---|---|
| Kernel (PIE funds) | $3,808,610 | Anytime, ~3–5 business day settlement | PIR on 5% deemed return |
| InvestNow (PIE) | $726,462 | Anytime | PIR on 5% deemed return |
| KiwiSaver | $710,837 | Locked until 65 except hardship/first home | PIR on 5% deemed return |
| Cash | $43,633 | Immediate | No tax drag once already in cash |
| MSFT vested shares | $219,628 | Anytime via Fidelity | FIF / direct-share admin until sold |
Recommendation in One Line
Use cash first, then sell down MSFT, then fund retirement primarily from Kernel and InvestNow, and leave KiwiSaver untouched until 65.
Draw Order Recommendation
| Order | Account | Why it comes here |
|---|---|---|
| 1 | Cash | Already available, no market sale needed, buys time for the first few months after stopping work. |
| 2 | MSFT vested shares | Cleanest asset to simplify early. Selling removes single-stock risk, reduces Microsoft concentration, and gets rid of ongoing FIF/admin complexity. |
| 3 | Kernel + InvestNow | These become the long-term retirement engine. Withdrawals are not taxable income, settlement is predictable, and PIE remains the most tax-efficient structure. |
| 4 | KiwiSaver | Locked until age 65, so treat it as the last pool of money. Best left compounding for decades. |
Practical interpretation
- Do not build a large permanent cash allocation inside the portfolio.
- Do keep enough money in the bank to cover near-term bills while PIE sales settle.
- If work stops now, a sensible first step is: use the existing $43.6K cash, sell the vested MSFT holding, then begin regular PIE withdrawals.
PIR Optimisation Analysis
The key lever is the PIR on the PIE portfolio.
- 28% PIR = 5% deemed return × 28% = 1.40% effective annual tax
- 17.5% PIR = 0.875% effective annual tax
- 10.5% PIR = 0.525% effective annual tax
The currently accessible PIE pool is $4,535,072 (Kernel + InvestNow). Total PIE assets including KiwiSaver are $5,245,909.
| PIR | Effective tax rate | Annual tax on accessible PIE | Saving vs 28% | Annual tax incl. KiwiSaver | Saving vs 28% |
|---|---|---|---|---|---|
| 28% | 1.40% | $63,491 | — | $73,443 | — |
| 17.5% | 0.875% | $39,682 | $23,809/yr | $45,902 | $27,541/yr |
| 10.5% | 0.525% | $23,809 | $39,682/yr | $27,541 | $45,902/yr |
What this means
If Jonathan stops working and the lower PIR applies, the family could cut annual PIE tax by roughly $24K–$40K on the accessible portfolio alone, or $28K–$46K including KiwiSaver.
That is a meaningful permanent reduction in retirement drag.
Modelled Scenarios
1. Quit at 41 (now)
Assuming work income falls away and the lower PIR can be applied once the income tests are met:
- At 17.5% PIR, accessible PIE tax falls by about $23.8K/year.
- At 10.5% PIR, accessible PIE tax falls by about $39.7K/year.
- Economically, that is equivalent to reducing annual spending by the same amount without cutting lifestyle.
Operationally, the sequence would be:
- Spend the existing cash.
- Sell the vested MSFT position early.
- Start drawing from PIE funds on a planned schedule.
2. Quit at 43
Using a conservative assumption of 9% annual growth for two more years and no extra contributions, the accessible PIE pool would grow to about $5.39M before withdrawals start.
| PIR after stopping | Annual tax on accessible PIE at 43 | Saving vs staying at 28% |
|---|---|---|
| 28% | $75,434 | — |
| 17.5% | $47,146 | $28,288/yr |
| 10.5% | $28,288 | $47,146/yr |
So waiting two more years improves the base and makes the PIR drop even more valuable in dollar terms.
3. Part-time consulting at $50K/year
On the threshold assumptions above, $50K of Jonathan income is too high for 17.5% PIR, because it is above the $48K taxable income cutoff.
That means the default modelling answer is:
- Jonathan at $50K consulting → 28% PIR stays in place
- To reach 17.5%, taxable income likely needs to stay at or below $48K
This makes the first dollars of post-retirement consulting surprisingly expensive from a tax-efficiency perspective.
Practical Mechanics
How to withdraw from Kernel
- Log in and place a sell order for the required dollar amount or units.
- Settlement typically takes 3–5 business days.
- Cash then lands in the nominated bank account.
The same logic applies to InvestNow, though the exact processing timetable may differ slightly.
How much to withdraw at once
The cleanest operating rhythm is usually quarterly, not monthly.
- Annual spending target from Current Plan: $200K/year
- Quarterly draw: about $50K
- Monthly equivalent: about $16.7K
Recommended approach:
- Keep roughly 1 month of spending in the bank for day-to-day liquidity.
- Refill from PIE quarterly.
- Sell from the most overweight fund first, so withdrawals also do rebalancing work.
This stays consistent with the broader policy of no strategic cash drag inside the investment portfolio.
Tax treatment of large withdrawals
A large one-off withdrawal from a PIE fund does not create extra taxable income.
The tax is paid inside the PIE structure on the deemed return, not on the amount withdrawn. In plain English:
- Selling $20K is not taxed as income
- Selling $200K is not taxed as income
- The tax question is driven by the PIE balance and PIR, not by the withdrawal size
That makes PIE especially clean for retirement drawdown.
KiwiSaver Strategy
Jonathan turns 65 in 2050, so KiwiSaver is a later-life reserve rather than early-retirement funding.
Recommendation:
- Leave KiwiSaver fully invested in growth funds.
- Rebalance freely within KiwiSaver — no spread, no tax event. Current target: 40% World ex-US (Unhedged), 30% S&P 500 (Unhedged), 20% EM, 10% Global 100.
- Do not mentally count on it for the bridge years between stopping work and age 65.
- Treat it as the final layer of safety and later-life optionality.
- All unhedged — hedging costs 1-2% pa, unacceptable over 23-year lock-up.
At the current balances, and assuming 9% annual growth with no further contributions:
- Jonathan's KiwiSaver ($562,577) grows to about $4.45M by 2050.
- The combined KiwiSaver balance ($710,837) grows to about $5.64M by 2050, though Julia's portion unlocks one year later.
That is why KiwiSaver should be the last money touched, not the first.
Important Caveats
- PIR is applied per investor / account holder, so confirm which holdings are in Jonathan's name, Julia's name, or joint names.
- PIR eligibility relies on the income tests and can depend on prior tax years, so the lower rate may not be administratively instantaneous.
- This page assumes current NZ tax settings continue.
- If MSFT is sold and reinvested into PIE before retirement, the long-term withdrawal engine becomes even simpler.
Action Items Before Executing
- Confirm with the tax advisor exactly when Jonathan can move from 28% PIR to 17.5% or 10.5% after stopping work.
- Confirm whether each PIE account is held in Jonathan's name, Julia's name, or jointly.
- Confirm whether any provider requires a PIR change form or evidence before updating the rate.
- Confirm the optimal timing for selling the remaining vested MSFT and whether any residual FIF filing is needed for that tax year.
- Confirm whether there is any reason to cap consulting income below $48K to preserve a lower PIR.
Bottom Line
Stopping work does not just reduce employment income — it may also unlock a materially lower tax rate on the core portfolio.
If Jonathan fully exits work and qualifies for a lower PIR, the effective saving is likely worth tens of thousands of dollars per year, while PIE withdrawals remain simple, clean, and non-taxable at the point of sale.