If I access my super early, how will it affect my retirement?
Earlier this year, the government announced a number of initiatives for Australians that have been financially affected by the COVID-19 pandemic. One of the measures announced introduced an early access of up to $10,000 of your superannuation in 2019-20 and another $10,000 in 2020-21.
However, there are a number of criteria that must be met, before you can even consider whether this is the right choice for you.
Open to Australian and New Zealand citizens and permanent residents who:
- 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.
If you are eligible, here are some things you should consider to help you work out if you should access early superannuation:
- do I need funds immediately to pay for basic costs of living?
- do I need a monetary buffer to cover basic of costs of living 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?
How will it affect my retirement?
The main people at risk from early superannuation withdrawal are Australia’s young workers. If you take into account compounding interest and the number of years until you retire, a $10,000 withdrawal could possibly become $100,000 over the course of your working life. It will have a substantial impact on your retirement savings if you can’t pay it back in a timely manner.
You should always consider speaking with a financial planning professional to understand the implications of withdrawing this lump sum from your superannuation on your individual circumstances. Superannuation is a long-term investment, making an uneducated decision now could have lasting consequences for many years.
Uncertain times call for certain advice. A CFP® professional is an expert financial planner who can help you create a financial plan that will weather potential setbacks or crises that arise and continue to allow you to live the life you want to live. If you have been affected by COVID-19 and want to discuss your situation, or if you just want general financial advice, then contact us and we’ll set you up with one of our financial planning experts.