WORDS: RITA ZAPPULLA
SMSF STRATEGIC ADVISORS
The COVID-19 crisis has seen more unprecedented moves than at any other time in history. In one of these totally unprecedented moves, the Federal Government recently allowed for Australians early access to their superannuation, which previously would not have been available for access prior to the age of 60. Applicants were permitted to access up to $10,000 prior to June 30 2020, and a second round allowed access to up to $10,000 between 1 July and 24 September 2020.
Around 2.5 million Australians have already withdrawn up to $10,000 of their superannuation under the early release scheme, and the same number is expected to request additional access in round two, according to a report by the Association of Superannuation Funds of Australia (ASFA).
I can totally understand that if you have lost your job and need to support yourself and your family why you may consider gaining access to your superannuation. But seeing people who have withdrawn the money to just spend on luxury items and other discretionary spending is quite alarming.
Sadly, according to research from Industry Super Australia, around 480,000 of the Australians who have accessed their nest egg early, have effectively emptied their accounts, with over 80% of them being under the age of 35.
Many people don’t realise that the money in their superannuation fund is their own money, and the purpose of the funds is to provide for their retirement when they can retire at age 60. A 25-year-old taking out $10,000 now could have $49,000 less in retirement, while a 35-year-old could lose up to $34,000 and a 45-year-old up to $23,000. This withdrawal may mean you’ll need to work longer before you can afford to retire, or else consider the option of just scraping by on the age pension in your retirement.
But it’s not too late to rectify this!
If you have withdrawn funds, you may want to consider topping it back up by supplementing your employer’s contributions of 9.5% of your salary. If your assessable income is below $39,387 you may qualify for the government co-contribution. By you personally contributing $1,000 during the year, the government will add $500 to your super. You can do a direct transfer of $20 per week to your superfund, or ask your employer to deduct this amount from your paypacket.
Alternatively, if your taxable income is above $50,000, consider salary sacrificing some of your pay. Start small with contributions of just $50 or $100 per fortnight, and keep increasing until you achieve contributions of 15% of your annual salary. Superannuation is not sexy. It’s not immediate. It’s a slow steady burn. But in 20 or 30 years time, the benefit of regular contributions and compound earnings will see you being very grateful for the small contributions you start making now.
Don’t be like so many of the retirees I meet who have less than $250,000 to retire on, trying to work out how this will provide them with an adequate income for the next 30 years of their retirement. The one comment they always make is “I wish I had started contributing to my super fund earlier.” It’s not too late to start. Please contact me if you’d like to discuss your options for a more comfortable retirement.
For more information on ensuring you retire with enough money, get in touch with Rita Zappulla at SMSF Strategic Advisors.
RITA ZAPPULLA is the Principal of SMSF Strategic Advisors and Strategic Business Insights. With over 20 years’ experience in the financial services industry, she enjoys providing clients with professional advice on a range of business and personal financial issues. She specialises in helping small business owners and retirees to understand superannuation and show them how they can reduce the tax they pay and help them plan for a comfortable retirement. Last year Rita released her first book Today’s Profits Tomorrows Freedom to help small business owners understand these concepts. Rita is a member of the Rotary Club of Cairns Sunrise and Board member of the Business Liaison Association. When Rita is not working or volunteering her time to local community organisations she loves to go to gym, do Booty Barre and Pilates.
