The economic damage inflicted by COVID-19 restrictions has seen over three million Australians dip into their superannuation savings. Whether you need that extra boost in cash or not, financial experts say it is nonetheless a good time to review the state of your superannuation account.
Temporary migrants were only permitted to access their superannuation once prior to July, whilst Australian citizens and permanent residents are allowed to have another withdrawal of up to $10,000 in the 2020/21 financial year.
But Financial Rights Legal Centre’s senior solicitor Jen Lewis says there are pre-existing grounds prior to COVID-19 that allow temporary migrants to withdraw more superannuation.
The categories of early access to superannuation apply to people in financial crisis and those aged over 55 who have been on certain Centrelink allowances for 39 weeks or more.
According to the Australian Taxation Office, pre-existing early access to superannuation categories are generally limited to $10,000. The withdrawal is taxed between 17 to 22 per cent except for those in severe financial hardship or over 60 years of age.
According to the Association of Superannuation Funds of Australia (ASFA), individuals and couples aged around 65 would need an annual budget of $27,902 and $40,380 respectively to live a modest lifestyle if they were to retire today. Yet, 2017-18 figures from the Australian Bureau of Statistics show that the median superannuation account balance for women is $45,000 while men had $65,000.
Dan Hewitt, a financial advisor of Perth-based Financial Framework says as most people do not have enough money within or outside of their superannuation to fully fund their retirement, the decision to withdraw your superannuation early will significantly diminish your retirement savings.
Because if you take out $10,000 at age 50, when you come to start to really need it in retirement in your maybe mid-60s onwards, that $10,000 has been out of your superannuation account for 15 plus years so if it’s appropriately invested, you would hope to generate bit of a return on that $10,000 which compounds over time so that $10,000 may end up being more like $25,000 or $30,000 when you factor in the lost gains over such a long period of time.
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