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Money taken out of super under the early release scheme doesn’t need to have a permanent impact on your retirement savings. We’ve crunched the numbers to show how you can rebuild your account balance in the future if you’ve made an early withdrawal from your super.
In late March, the Australian Government announced that people affected by coronavirus could apply to access up to $10,000 of their superannuation in 2019-20 and up to a further $10,000 in 2020-21 (conditions apply).
In the first month of the scheme, more than 1.65 million Australians withdrew $13.2 billion from their super.
Read more about early access here.
ASIC MoneySmart released a new super withdrawal estimator to help Australians consider the impact a withdrawal today will have on their retirement savings. Here’s the estimated reduction a $10,000 withdrawal will have on the super balance of someone retiring at age 65.
It’s important to understand what retirement you want in the future. Online tools such as the Government’s MoneySmart retirement planner calculator can help you work out what you need in retirement and whether you will still be on track even if you have taken some out.
Find out if your retirement savings are on track
If you have taken money out of your super to help you get through the current crisis, the good news is that it doesn’t have to be a permanent withdrawal. When you’re back at work and on top of your finances you can add back to your super and rebuild your retirement savings.
If you choose to, it’s possible to recover the money you withdrew by adding back small amounts over time. The younger you are the less you need to add because you have the benefit of time and the magic of compound interest on your side.
If you’re under 40 years of age, our calculations show that you can recover a $10,000 early withdrawal by making after-tax contributions of around $10 to $15 a week until age 65. If you are over 40, you could catch up by making weekly after-tax contributions of $15 to $20.
The more you add the sooner you’ll get your retirement savings back on track.
Making extra contributions can be a great way to boost your balance, but it does take commitment over time. Think about how fast you want to rebuild the money you withdrew and choose an amount you can afford to add back in.
There are plenty of ways to add to your super including making additional contributions or regularly salary sacrificing. If you make voluntary after-tax contributions, you may be eligible to receive a co-contribution from the Australian Government.
Combine your multiple super accounts to avoid paying multiple fees. You can search for any lost or unclaimed super you may have in MyGov. Or if you already know the accounts you’re consolidating with QSuper, simply log in to Member Online and enter your other super fund details.
Some employers may pay super at a higher rate, or will pay more if you make extra super contributions. If you’re employed, check with your employer directly or learn more about employer contributions.
How well your super fund performs and how much you are paying in fees will impact your account balance. It's worth taking the time to see how your super fund measures up and moving your money to the best super fund for you.
As a QSuper member you have access to over-the-phone financial advice. Personal financial advice may help you save money right now, build a better future retirement, protect what you have and set strategic goals.
Find out more.
1. These figures are illustrative only and should not be relied upon as actual results will differ depending on the timing of contributions and returns and fees for each investment option. You should seek financial advice for your personal circumstances. The calculations are based on the assumptions used in the MoneySmart calculator www.moneysmart.gov.au (accessed 7 May 2020) for Accumulation accounts only. The calculation has been rounded to the nearest dollar. The estimates provided are shown in today's dollars, which means they are adjusted for inflation by 4.0% p.a. (2.5% p.a. due to the rising cost of living [CPI inflation] and a further 1.5% p.a. for the cost of rising community living standards). Investment returns are defaulted to an assumed rate of investment return before tax and fees of 7.5% p.a. Assumed tax on earnings is 7.0%.
New temporary access to superannuation
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