While the government has announced approval for individuals to access $10,000 of tax-free money from superannuation to assist with the growing financial concerns surrounding the impact of COVID-19, accessing your superannuation savings should be an absolute last resort.
Should individuals (who are eligible) access the $10,000 withdrawal from superannuation, they will realize any capital losses (if cash allocation is not available to redeem from) which can significantly impact their superannuation savings over the long-term. The below table highlights the impact of lost earnings if the $10,000 withdrawal was activated.
|Age Of Withdrawal||Withdrawal||Lost Earnings to age 67*|
*This is an estimate only. Growth & Income based on 8% average return per annum.
The above numbers double if you decide to withdraw $10,000 this financial year and $10,000 next financial year. These results are particularly troubling for young people.
Accessing emergency cash reserves and liquidating unnecessary assets outside of superannuation should be actioned prior to considering the need to access personal superannuation savings.
Longevity is increasing along with the rise and cost of living standards. It is therefore fundamentally important to ensure superannuation is used for its intended purpose which is to fund your lifestyle throughout retirement. The government age pension is typically insufficient in meeting total living and lifestyle costs and is developed to compliment your personal pension withdrawals from your accumulated superannuation (and other assets) to effectively fund your ideal retirement.
Relying on the Government age pension to fund your retirement effectively and totally is irrational. It is necessary to gradually build up your superannuation throughout your working life to effectively fund your retirement needs.
If you are considering accessing your superannuation under this relief package or are concerned about your current investments, we recommend contacting Future Key Financial to assist you navigate through this unprecedented event.