Accessing super: help yourself without future financial pain
Money is flowing from Australians’ superannuation funds as hundreds of thousands of applications for the government’s early-release scheme get approved. Here’s how it can help.
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Withdrawing money from your superannuation account to help survive the coronavirus crisis does not mean your retirement income will be permanently damaged.
Despite warnings that $20,000 withdrawn now could leave a financial hole more than five times larger at retirement, super fund members have opportunities to pay it back and broaden their wealth beyond super.
Fiduciary Advice co-founder Andrew Crawford said many in the super industry assumed that people’s total retirement balances would come from superannuation “but that’s not the reality”.
“For most people it’s a mix of age pension, maybe rent from an investment property or some dividends from shares, or they may release some equity in their home,” he said.
Mr Crawford said people suffering financial hardship from the COVID-19 fallout would be better off withdrawing super rather than losing their house or taking a big hit to their credit rating.
“Keeping your home and having peace of mind about your finances is far more important,” he said.
“You can make up the lost contributions later when you return to working.”
Tax-deductible personal contributions, spouse contributions and co-contributions are among the ways people can get extra financial benefits by putting money into their super.
Borrowers are being offered six-month mortgage repayment holidays to help cope with the crisis.
Wealth for Life Financial Planning Principal Rex Whitford said many people withdrawing their super under the COVID-19 rules were unlikely to put the money back.
“I don’t like seeing people pulling money out of long-term savings, but what’s the alternative?” he said.
The decision to withdraw should not be taken lightly, and Mr Whitford said it should reflect people’s individual circumstances.
“How much longer would it take you to buy another house if you are going to lose that?” he said.
“Plus the stamp duty, which is a real loss. Keep the house you have got right now.”
Mr Whitford said super fund members were unlikely to rebuild lost balances quickly “unless you have a predetermined strategy to pay yourself first by using salary sacrifice”.
He said super should not be people’s only form of retirement saving.
Governments will want to claw back billions and super’s a constant target for rule changes.
“Now, more than ever, it makes sense to have a pot of money separate to superannuation that doesn’t have the same legislative strings attached,” Mr Whitford said.
Originally published as Accessing super: help yourself without future financial pain