Aussies impacted financially by the coronavirus crisis have been warned not to withdraw their superannuation early.
From today, the government has made retirement funds available to those experiencing financial hardship during the pandemic.
However, experts warn that taking cash out of a fund now will be disastrous, and cost dearly in the longer term.
Aussies impacted by coronavirus should ‘think twice’
Almost 900,000 people have already registered to take cash out.
To be eligible, you must be a citizen or permanent resident of Australia or New Zealand and be either unemployed, or eligible to receive:
- the Jobseeker payment,
- youth allowance for jobseekers,
- parenting payment,
- special benefit
- or farm household allowance.
Those eligible can withdraw $10,000 from their fund this financial year, and a further $10,000 next financial year.
But financial experts are warning people to think twice before taking cash out of their retirement savings now.
Australian Securities and Investments Commission senior executive leader, Laura Higgins told news.com.au:
“Before you withdraw super, there are two main things you need to consider.
“Firstly, have you considered other options such as government financial assistance or applying for a hardship variation on your mortgage?
“Secondly, are you considering the long-term impacts?
“Money withdrawn and spent now is money you won’t have invested for the future.”
Absolute last resort
Finance expert Natasha Janssens also says withdrawing super early is a huge mistake:
“Superannuation tends to grow over the long term, and by taking out more than necessary now, people might miss an opportunity for future growth, leaving them with a lower retirement balance.
“Early access to retirement savings should only occur under extenuating circumstances and needs to ensure it gets to those who need it most, in an efficient manner.”
Withdrawing $25,000 today could cost $130,000 by retirement
For example, a 25-year-old who withdraws $20,000 from their super now could end up losing more than $130,000 when they retire.
Similarly, the same withdrawal from a 35-years-old’s account could represent an $80,000 loss of future benefits.
“It must be an absolute last resort after you have exhausted all other government-related options,” Ms Janssens stressed.
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