It has centred around a scare campaign which says if you withdraw cash from your super fund you’ll be poor in retirement.
Yes it’s true… but it’s not as bad as it’s being made out to be. Logically if you don’t have as much money in a super fund it won’t grow as much as if it was there.
I should point out that superannuation funds charge fees based on a percentage of what you have invested with them… so there is a big conflict of interest. The more you have invested the bigger the fees the super funds earns for itself.
It has come about because more than 900,000 Australians have applied for early release of their super (up to $10,000) which equates to $7.47 billion. The government has estimated around 1.6 million Australians will seek access they’re super.
If you’re eligible, you can access $10,000 of your super before July 1, and a further $10,000 until September 24… effectively, a maximum of $20,000.
So as part of their scare campaign, Industry Super Australia has warned that a 30-year-old making the maximum $10,000 withdrawal today would have $97,214 less in their super than they otherwise would have by the time they retired at the age of 67.
But a similar calculation using the Australian Securities & Investments Commission’s MoneySmart online calculator estimates the hit to a retirement balance would be only $43,200.
My view is it’s your money. If you can’t feed your family to pay the bills because of the recession, then you are absolutely entitled to tap into your super.
But then, my advice is that when things get back to normal in a year or so, start making extra contributions into superannuation to put it back.
That way you have the cash now to survive this period and then have time to make sure your retirement payout isn’t damaged.
Applications for your super will be accepted through the Australian Tax Office. To access your money, you must meet the following criteria:
1. You are unemployed. You are eligible to receive a Job Seeker payment, Youth Allowance, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance.
2. On or after 1 January, 2020, you were either: made redundant; your working hours were reduced by 20 per cent or more; if you were a sole trader, your business was suspended or there was a reduction in your turnover of 20 per cent or more.
This post was written by David Koch as part of his weekly Your Money & Your Life newsletter.