Here it is… some critical factors for consideration before super withdrawal decisions. Riveting stuff.
Changes to superannuation access
The Australian government has made changes to allow people to withdraw up to $10,000 from their super accounts to help out those struggling financially due to the pandemic.
Lots of Aussies decided to take up the offer but didn’t quite spend it how the government had intended. Instead of medical bills and food, online surveys found that clothes, gambling and alcohol and tobacco purchases made up a good chunk of spending.
Is this a problem?
Whilst some retail therapy is fair when you’re stuck at home, the fact that this money is coming from your super account is where certain issues might arise.
More money ≠ more problems for super.
The beauty of super is that it is intentionally designed to be untouchable (usually) so people benefit from a longer investment horizon.
The longer the money is in an account for, the higher returns are likely to be. This could be from interest on cash or share investments combined with the impact of compounding.
To put a bit of perspective on this, that $4 coffee that you bought with your super withdrawal means you could actually be down about $47 by retirement time.
Taking out $10,000 means that you could be $118,000 worse off in the future.
So… should I withdraw?
Any withdrawals you make should be pretty considered. Superannuation is a bit of a tricky beast because a lot of Australians find that when it comes time for retirement, they don’t have enough saved.
Less super might mean you have to cut your dreams of going on a seniors cruise, but it could be severe enough that you struggle to pay for necessities or medical bills.
This definitely doesn’t mean that there aren’t valid reasons to withdraw. Just think about how you want to spend it and whether you reckon it could be better to have that cash plus compounding in your pocket when you’re 70.