In March the Government announced a range of initiatives designed to assist those who have been impacted financially by the COVID-19 crisis. A temporary measure introduced for individuals is the early access of up to $10,000 of your superannuation in 2019-20 and a further $10,000 in 2020-21. This option in open to Australian and New Zealand citizens and permanent residents.
To be eligible to access your superannuation early you must meet the following criteria:
- Are unemployed
- Are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance
- Were made redundant, had reduced working hours by 20 per cent or more or sole traders that had a reduction in their business turnover of 20 per cent or more after 1 January 2020.
Do I really need to access my superannuation early?
If you pass the eligibility criteria, you need determine whether accessing your superannuation is the best option available to you. Some things to consider include:
- Do I need funds immediately to pay for basic costs of living (rent, food, bills, living, etc)?
- Do I need a monetary buffer to cover basic of costs of living (rent, food, bills, living, etc) for the next 6 months?
- Do I want to use the money to fund other financial goals to improve my financial position such as purchasing an investment property?
Know your options
Before you withdraw any superannuation, talk to your bank or lender about how they can help.
You may be eligible for a range of Government payments designed to help you during the COVID-19 crisis. These include:
- Income support payments – crisis payments and a temporary fortnightly $550 coronavirus supplement.
- Household support payments – two automatic $750 Economic Support Payments.
- JobKeeper Payment – $1,500 a fortnight for 6 months may be available to employers to keep paying eligible employees whose hours have been cut.
How will it affect your retirement?
Your superannuation is your savings for retirement, so any withdrawal now will have an impact on the money available when the time comes to retire. Here are some examples:
- If you have enough cash within your superannuation, taking it out won’t make a huge difference (as long as you can pay it back). You may also miss out on opportunities to invest into other assets such as shares at a time where there is maximum opportunity.
- If you do not have cash within your superannuation, you will be taking the funds from investments at a low point in the market. The $10,000 you withdraw may have been $20,000 just a few months ago and may well be valued higher again in the not-too-distant future. Taking into account compounding interest and the number of years until you retire, that $10,000 could easily become $100,000 over time. It will have a significant impact on your retirement savings if you can’t pay it back quickly.
The bottom line is you need to be able to pay back your retirement or there could be losses that could impact your quality of life in retirement.
You should consider talking to a financial planning expert to understand the implications of withdrawing money from your superannuation. A Certified Financial Planner will be able to assess your personal circumstances and determine whether accessing your superannuation early is the best option for you. Making a decision that is wrong for you now could have lasting consequences into your retirement.
Ref: https://fpa.com.au/if-i-access-my-super-early-how-will-it-affect-my-retirement