Sydney woman withdraws $20,000 in super early to pay off debt and buy $700,000 house

The woman found a clever way to pay off her debts and secure a new home.

Jane Hagan is one of millions of Australians who decided to access her super early and has no regrets about doing it as she is about to move into her own home for the first time.

She tapped into her fund taking out $20,000 under the early release scheme put in place during the COVID-19 pandemic.

The Sydneysider had lost her job in the construction industry in April and already had substantial credit card debt.

“I took the first lot out because I didn’t know long I would be unemployed for and took the $10,000 out for that and then later after July 1 I was able to take the other $10,000 out because I hadn’t been able to pay my credit cards off with 10 weeks off work,” she told news.com.au.

“It was the right decision for me, obviously you are paying 20 per cent per annum interest on credit cards and you’re not going to get that return from your super account, especially in a pandemic situation.

“Just looking at those two facts, the return and paying off credit card debt was going to be a lot bigger than leaving it in super.”

The controversial scheme was introduced by the government but was closed at the end of 2020. Critics argued the short term financial gains from using superannuation early would mean missing out on a huge chunk of money by retirement age and would affect people’s ability to have a comfortable life.

Three million Aussies used the scheme to withdraw from their super, with some using it to buy a house. Picture: iStock

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The funds were enough to clear her credit card debt and she was lucky enough to score a new job in June.

The 39-year-old decided that she would use her debt free status to furiously save for a house deposit.

“I didn’t know prior that you could have a really low 5 per cent deposit to buy something and I came across this first home loan deposit scheme and I found out that buying a unit wasn’t as far out of the possibility that I always thought it was,” she said.

Ms Hagan lived a very “boring life” for six months – refusing friend’s requests for dinners out, bringing her lunch to work and cooking all meals – and managed to save $35,000.

“Prior to COVID, I would have planned to go overseas skiing at this time of year and I didn’t have that to save up for or look forward to so staying in and not doing much and not spending money wasn’t too much of impost compared to if had to give up an overseas holiday for it,” she said.

Jane Hagan picks up the keys to her new Sydney unit at the end of March. Picture: iStock

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She snapped up a one-bedroom unit in Wollstonecraft for $700,000, which will settle at the end of March, where she’s excited to be able to drill a hole in the wall.

“It gives me that comfort that I’ve got somewhere to live in once I do retire,” she explained. “Also once you factor in how much house prices are predicted to rise over the next five years – and there were some predictions they would rise as much as 10 per cent per annum but they will rise at least 6 per cent per annum – the money coming back to me and money I don’t have to spend trying to get into the housing market further down track means it’s more affordable for me now.”

She recommends people talk to a financial planner and educate themselves on programs that can help, including the first deposit home loan scheme.

Ms Hagan added that she still has a three figure super nest egg left after her early withdrawal and said she has around 30 years left of working to continue to increase it, so isn’t worried about taking the $20,000 chunk out.

$36 billion was withdrawn from Australian super funds, according to ATO data. Picture: iStock

The scheme saw nearly 3 million people tap into their retirement savings. More than $37 billion was accessed from Aussie super accounts, figures from the Australian Prudential Regulation Authority showed.

A survey from the construction industry super fund in September last year found that a quarter of people who accessed their superannuation under the scheme made the decision within a day, with critics hitting out at the long term impact on Australians’ finances.

Aussies can still access their super early but under strict conditions such as being unemployed for six months and being unable to meet family living expenses.