To offer some financial support to Australians during the Coronavirus economic crisis, the government has implemented new temporary stimulus measures – and one of these measures is to allow eligible Australians early access to their superannuation.
Sounds great to anyone who has lost their job or is under financial strain?
Well, it might not be that simple. Read on to see the pro's and con's of taking money from your super now.
Tempted to take money from your superannuation now?
Under the new temporary stimulus measures, eligible Australians will be allowed to access up to $10,000 from their superannuation this financial year, and another $10,000 next financial year. Let's look at the pro's and con's of this strategy.
Pros: If you've lost your income or your income has been severely reduced and you need cash to get by, it's a tempting offer.
Money accessed through this scheme is tax-free and ready now.
You don’t have to take out the whole amount - just what you need up to $20,000 in total.
But...... it's not necessarily the fix-all that it might seem.
Cons: You also need to consider the downside of accessing your super now.
You can lose more in the long-term than you gain in the short-term because of the power of ‘compound interest’ (meaning when small amounts of money are invested today, they can grow significantly over time).
For a 30-year-old who withdraws $20,000 today, they could lose $100,000.
Keeping your money in your super is more important the younger you are.
So, what are the alternatives?
If you want to avoid taking money out of super, consider these alternative options:
- financial assistance through the government – jobseeker, job keeper
- contact your bank and ask about a hardship loan
- contact your electric company and credit card company as many are offering reduced bills
- look at your subscriptions and regular expenses - are there things you can cancel?
If accessing super is your only open, try to only take out as little as you need - you can just take out $5,000 or $3,000 rather than the whole amount allowed
It is a short-term fix, and you can build your savings back up again once you start working and being paid but it might take a while to get back to the same level as before.
At Profacc Accountants & Profacc Financial Planning, we are here for all your finance and business advice. We can help you understand your personal and business situation, and implement strategies now so help you in the long run.