Early release of super should be a last resort action
As at 16th April 2020, the ATO had received 881,600 Australian’s registering an interest in accessing their retirement savings under the Government's temporary Early Release of Superannuation scheme. It is one of a host of measures to help households make ends meet during the coronavirus crisis and is expected to rise to 1.6m as indicated by Jane Hume, the Assistant Minister for Superannuation.
Under this scheme, those in financial hardship can access up to $10,000 from their super, tax-free, this financial year and a further 10,000, tax-free, from July 1 until September 24, when the measure ends.
However, anyone thinking of applying for their super should be aware of the detrimental consequences that this action could have on their retirement income.
Modelling by Super Consumers Australia shows early access could cost retirement balances the equivalent of $50,000 in today’s money. For a 30-year-old, the impact of withdrawing $20,000 would be $49,823 by retirement age, the modelling shows.
Also, depending on when you take the funds out of your super, you could be redeeming your investment when investment returns have significantly dropped. The Median Balanced option fell 8.9% in March and 10% this Calendar Year. The impact is worse for the Median Growth option of 12.5% and 14.1% over the same periods.
So, we encourage you to think carefully before applying for the Government’s early access scheme.
Further information can be found at the Early Access to your Super page at the ATO website.
WLM is here to help. If you would like to discuss your options under this scheme or any other financial matters, please contact us.
To find out more about WLM's financial planning services click here.
It's never too late or too early to think of how your super is set up so you can retire comfortably. Find out more about making the most of your superannuation.