Money and Life
(Financial Planning Asociation of Australia)
In March 2020, the federal government announced early access to super as one of their measures to support people experiencing financial hardship during the COVID-19 pandemic. Find out some things to consider when looking at this option to take the pressure off your finances at this challenging time.
Throughout March 2020 the federal government has been releasing details ofÂ financial support available to AustraliansÂ who have lost income due the economic impact of the COVID-19 pandemic. A huge number of us have been affected in some way and many have been left feeling stressed and confused aboutÂ what to do to keep afloat.
AlthoughÂ concern about moneyÂ isnâ€™t the only problem weâ€™re grappling with, financial stress is likely to be on the rise, even among those of us who are generally pretty good at staying on top of our finances. A sudden and unexpected loss of income can send anyone into a panic and many will be looking for ways to replace that income to stop them from racking up debts or running out of savings in a matter of weeks.Â Â Â Â Â
Who can withdraw super and how much can I get?
One option Australians in need may be looking at is applying for early access to their super savings. Get all the details on who is eligible, how much you can withdraw and when, from aÂ fact sheet on early access to superannuationÂ from the federal government.
Hereâ€™s a quick summary of some of the more important details of this temporary measure to ease financial hardship:
â€“ Eligible Australians will be able to access up to $20,000 from their super fund or funds.
â€“ If you meet the financial hardship criteria, you can apply for $10,000 before 30 June 2020 and a further $10,000 after 1 July 2020.
â€“Â Early withdrawal is available to people who are unemployed, have had their working hours/business income reduced by 20% since 1 January 2020 or are receiving Centrelink payments.
Â Playing catch-up
A payment of $10,000 or even $20,000 is a very welcome injection of cash at a time when you may be struggling to cover basic costs like your rent, groceries and utility bills. However, itâ€™s really important to remember that these super savings have the potential to make a significant difference to your level ofÂ income in retirement.
If you dip into your super now, you couldÂ find yourself lagging behindÂ in having the savings you need to live comfortably when youâ€™ve stopped work for good. â€śThe ramifications of accessing super early could be really significant,â€ť says Ben Marshan, Head of Policy and Standards at the Financial Planning Association of Australia (FPA). â€śConservatively, every $1000 that you have in super at age 30 will be worth about $4500 at age 60. If you take $1000 out now, you have to put in $4500 over the next 30 years to get back to the same position. Financially, for a lot of people that can be a massive struggle and theyâ€™ll never actually catch up.â€ť
Multiply that $1,000 by 10 or 20 and you can start to see what you could be sacrificing from your retirement nest egg by making a substantial withdrawal now. And this is why itâ€™s so important to get expert advice before making a decision, as well as exploring other options. â€śConsider getting professional financial help to understand the implications for yourself, Marshan advises. â€śAccessing your super early should only ever be a last resort.â€ť
What are my other options
If you already have a financial planner, itâ€™s definitely worth reaching out to them at this time to talk about whether you should be using your super as a temporary income boost. â€śThe FPA supports this measure as an option for Australians who need it,â€ť says FPA Chief Executive Officer, Dante De Gori CFPÂ®. â€śBut we do recommend any individual who meets the requirements to access their super to consider whether this is the best option for them and look at all alternate options before they do use their retirement nest egg.â€ť
â€śIf you do not have a financial planner then give some thought toÂ contacting an FPA memberÂ to assist you,â€ť Dante adds. â€śYou can also speak to your bank, utility providers, landlord and other service providers to see what relief and options are available to you before you decide to access your super. But obviously if you need to access your super you should and if possible make a promise to yourself to replace this amount when your situation turns around in the future.â€ť
Seeking advice is particularly important if you are told by any service provider that you have no other option but to access your super. The financial services regulatorÂ ASIC has recently taken steps to caution landlords and property agentsÂ against suggesting that tenants should be accessing super to keep paying their rent. Making such a suggestion could be seen as giving financial advice, and real estate agents are neither qualified or licensed to provide such advice.
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