When the government announced a few weeks back that Australians who met certain criteria would be able to take up to $20k from their super over a set timeframe, I nearly fell off my chair! Given the fact it’s in the governments best interest for you to build your super up as much as possible over your working career (so you don’t rely on a government pension), I was truly surprised by this move. However, COVID-19 is an unprecedented (apparently this is the world’s favourite word at the moment) situation, so hard decisions had to be made.

According to the ATO, eligible Australian and New Zealand citizens and permanent residents are able to apply to access up to:

  • $10,000 of their super until 30 June 2020
  • a further $10,000 from 1 July 2020 until 24 September 2020.

To be eligible for this, you must meet at least one of the following criteria:

→ You are unemployed.

→ You 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.

→ On or after 1 January 2020, either

  • you were made redundant
  • your working hours were reduced by 20% or more
  • if you are a sole trader, your business was suspended or there was a reduction in your turnover of 20% or more.

I personally think that unless you need your super for pressing expenses right now, it should stay locked away for retirement, and I said as much on a recent episode of The Australian Finance Podcast. My Co-Host Owen Raszkiewicz had a different approach, and I’d encourage you to read his article on it and consider both the pros and cons before making any decisions. I’d also encourage you to talk to a financial counsellor, a financial advisor or a trusted family member about this as well.

In terms of some of the things you should consider before accessing your super and the impact of taking out $10k in your 20s, I’ve asked Sarah Foreman (Group Executive, Advice) from First State Super, for her thoughts.

What should you consider before accessing your super?

We know that for some Australians in financial distress, taking advantage of the Government’s changes to early access to superannuation will assist them to meet their day-to-day living expenses. That is why we are currently supporting our members whose application to withdraw super was approved, by ensuring they receive their money as soon as possible.

Generally, we believe early access to superannuation should be a last resort, particularly because of the impact it can have on a member’s long-term financial outcome. That is why we would encourage anyone thinking of accessing their super early to seek advice, either from their super fund or someone they know and trust, to understand what options may be available to them.

It is never too late to get advice. Part of getting through today’s challenges might mean making a small adjustment rather than a wholesale change while accessing the different types of assistance offered by the government and the broader community.

Making informed decisions now will make a very real difference to your long-term financial future.

What does the impact of taking out $10k in your 20s have on your retirement?

Between its high on 20 February and 23 March this year, the ASX 200 dropped more than 36%, significantly reducing superannuation savings across the country (although the market has rebounded some way to mid-April, we are cautious in assuming this will be a sustained sharemarket recovery). Accessing up to $20,000 of their superannuation over the next few months means community members may crystallise that immediate loss.

Accessing your superannuation now also means you will miss out on the opportunity to benefit from this money if investment markets recover. While it might not seem like you are withdrawing much now, it can make a big difference to your super balance when you retire. This is because investment earnings are reinvested back into your account, compounding over time.

For example, our modelling shows that a 25-year-old who accesses $10,000 of their super now could be up to $45,000 worse off in their retirement. If they were to withdraw $20,000 this would leave them around $90,000 worse off when they retire. This is a significant amount of money and could materially impact their long-term financial future.

How do you lodge an early release request?

Those wishing to access their super early need to register their interest through their MyGov account. When the ATO receives and approves a person’s application, it will be sent on to the person’s super fund.

I hope this has given you some more information around accessing your super early and I encourage you to do as much research as possible prior to making any decisions.

Kate — HTM Founder & Editor

Want to learn more about money and personal finance? Check out our article archive, the How To Money Podcast and the Australian Finance Podcast. Catch us on Twitter @HowToMoneyAUS and Instagram on @HowToMoneyAUS.

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