With every financial decision you take, there will be pros and cons.
First of all, let’s acknowledge that many people are doing it tough financially in the current pandemic, and accessing money from super may be essential for day-to-day survival. The Australian Government now allows individuals experiencing financial hardship from Coronavirus – who meet specific eligibility criteria – to access up to $10,000 of their superannuation in the 2019/2020 financial year, and an additional $10,000 in the 2020/2021 financial year.
But before you take any money out, here are four important things to consider.
- Taking your super out early classifies you in ‘financial hardship’. Financial hardship refers to a difficulty meeting the repayments on one or several financial commitments due to a change in circumstances, which may or may not be temporary.
- If you’re eligible to withdraw your super due to your working hours being reduced, and are looking to apply for finance, you will need to work closely with your mortgage broker to put you in the best position possible to achieve a loan approval. Given that accessing your super early labels you as suffering financial hardship, this needs to be handled very sensitively with lenders.
- Early release of your superannuation will negatively impact the size of your nest egg by the time you reach retirement age. That might seem a long way off, but you need to carefully think about that impact. The Moneysmart calculator here lets you estimate the financial impact on your retirement savings.
- Other solutions are available rather than drawing down on your super. With existing loans, some banks are offering temporary repayment deferrals on mortgages, and first home buyers may benefit from the First Home Super Saver Scheme. Or you may be able to refinance your existing loan to save some money every month.
At Loan Gallery, we always want you to have the facts to make an informed decision. Our recommendation: on balance, if you don’t genuinely need the money, keep it in superannuation. It is one of the best ways you can grow your lifetime wealth as it is tax effective, and no-one wants to be left short of funds when they retire.
Of course, the other great way to grow your wealth is to invest smart and long term in property. Our expert brokers are always just an email away if you’d like to discuss refinancing, commercial lending or first home buyer options for you or your family members. Having a chat is always confidential and obligation free! There may well be a more imaginative solutions to your needs rather than drawing down “super”.
Please note: we do not provide tax, legal or accounting advice. This guide has been written for general informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. We encourage you to consult your own tax, legal and accounting advisers before engaging in any transaction.