The big risk that comes with accessing your super early


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The window to access your superannuation early has been pushed back to December 31, but is dipping into your nest egg early worth the temporary relief?

The early release of super scheme, originally slated to wind up on September 24, allows people to apply for up to $10,000 of super savings.

The government estimates that extending the scheme will cost $2.22 billion.

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If you took out the full $10,000 last financial year, you'll be able to take out another $10,000 this financial year. But if you didn't take out anything last financial year, you won't have a larger withdraw allowance this time around - it will be capped at $10,000 for everyone this financial year.

To be approved for early super access, you'll need to prove:

  • You are unemployed; or
  • 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;

    or that on or after January 1, 2020:

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

Though for many accessing super may be a last-ditch lifeline to weather the recession, you'll be left holding the bag years down the road.

"The superannuation system is designed as a long-term mechanism to save for retirement," Future Super managing director Kirstin Hunter tells Money.

"Money is deducted from salary; it's then invested making compound interest over the working years."

That compounding interest is the important part - you'll realistically be disproportionately worse off than the amount you take out from super now.

"The amount that's sitting in superannuation earning compound interest, which is building over your lifetime, will be lower."

"There's a risk that by the time you get to retirement you'll have a lower balance, or won't have enough to support you through retirement."

How much lower?

MLC Life Insurance estimates that a 30-year-old taking out $10,000 would be $43,032 worse off come retirement, a 40-year-old taking out the same amount would be $35,024 worse off, and a 50-year-old would be $28,506 worse off.

It comes down to a simple choice - do you need the money so badly now that you're willing to give up exponentially more wealth by retirement?

"While superannuation helps people save for retirement, the government recognises that for those significantly financially affected by the Coronavirus, accessing some of their superannuation today may outweigh the benefits of maintaining those savings until retirement," notes the Treasury department.

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David Thornton was a journalist at Money from September 2019 to November 2021. He previously worked at Your Money, covering market news as producer of Trading Day Live. Before that, he covered business and finance news at The Constant Investor. David holds a Masters of International Relations from the University of Melbourne.

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