As part of its economic response to the coronavirus crisis, the Federal Government is allowing those facing financial hardship to access up to $10,000 of their super before 1 July 2020 and another $10,000 from 1 July 2020. People can apply online through the myGov website.
For those struggling to make ends meet, it’s a tough decision. What you need to consider is the trade-off between your current situation and the one you may face in retirement.
Withdrawing money from super now when investment markets are down means crystallising current losses and giving up the benefits of eventual recovery in markets. It will also reduce your savings at retirement since you miss out on future compound interest. This means less income after you stop working.
Some retirement estimates to help you decide
Using assumptions similar to those used by super funds to provide retirement estimates in annual statements to members, we have estimated the impact an early withdrawal of $20,000 could have on your super balance at age 67. The table below assumes your savings grow annually at a rate of 3% above inflation less administration fees (assumed to be 0.5%).
|Current Age||Reduction in retirement balance|
Source: Super Consumers Australia
As you can see, the cost at retirement of withdrawing money from your super now could be significant. It could mean having to work for longer before retiring.
We’re here to help
We understand that many people are currently doing it tough and may need to rely on the early access to super changes as they do not have other means to support their families. But before deciding to take money out of your super we recommend you explore other ways of obtaining financial assistance first.
That’s where we can help. We can help you consider all the options available to you including access to government support payments, as well as advise on debt matters and potential adjustments to your lifestyle. Please give us a call on 03 9896 5100.