If you’ve been laid off or had your hours and your salary reduced by 20% due to the "Rona", then you may be seriously considering dipping into your retirement savings under the Government’s early access to super scheme.
It’s tempting. After all, surviving the present, AKA rent, food, phone bills, is a prerequisite to being able to retire and use any cash you’ve stashed away to begin with.
And right now the present is not a fun place to be for many young Aussies. Since COVID struck, employment for those aged 20 - 29 has fallen by 11.8%, while those in their 30s have seen a drop of 5.5%.
If you’re hurting financially, then getting your hands on $20K from your super (you can withdraw $10K this financial year and $10K the next) would no doubt help. But before you fill out that ATO form, it’s worth pausing for a minute to consider what you are losing in the process, and if you’re totally OK with that. After all, is it worth making your financial situation worse than it already is?
Here’s the thing—every dollar in your super right now is worth more than any other dollar you will EVER put into your super. Why? Because of time.
Right now you may not be able to afford a house. You may be working a job you’d rather not, with a far from stellar wage. But you have one massive advantage your boomer boss doesn’t when it comes to your super. Time. That’s right, for once being in your 20s and 30s is a serious financial advantage that older investors would give their right arm to have back again.
Time has a magical effect on increasing your money, and best of all you don’t have to do a single thing to take advantage of it. If you’re in your thirties, time will transform that $20K you planned to withdraw into at least $50K by the time you retire. If you’re in your 20s, you’ll blow past that $50K with ease.
But if you withdraw your super right now, you’ll break the magic spell known to finance nerds as compound interest. You’ll give up the financial power and advantage you still have.
By all means, keep the early access super ace up your sleeve, but only consider playing that card when you really need to. Move back in with mum and dad, cancel your phone plan and ask for a rent reduction. If you can do everything in your power now to avoid breaking the spell that is maximising your chances of future wealth, then you should.
Instead, show your super some much needed TLC right now. Consolidate your multiple accounts, invest it in something worthwhile and pay attention to what’s happening with it. That way, if it turns out you really do need it at some point down the track, there’ll still be something left.
Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation, or needs. Therefore, you should consider whether the information is appropriate to your circumstances before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.
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Image credit: Riccardo Mion