While I don’t disagree with the Australian government’s decision to allow people to take out $10,000 one year and $10,000 the next due to Covid-19 – I do not view it as a lifeline.
I view it as having a massive night out – but the hangover could last the rest of your life.
Unfortunately thousands of Australians have taken up the measure.
Let’s assume then that Australian Super’s fund managers have a tough time over the next 35 years, and can only deliver 8 per cent returns in their ‘balanced’ fund.
That $20,000 withdrawn today will still be $295,707 in lost retirement income.
If you’re 50, with 15 years left to work, you’ll lose $80,852, using Australian Super’s numbers, and if you’re 60, it’s $31,860.
https://www.amp.com.au/insights/COVID-19/things-to-consider-before-accessing-super-early
AMP mentions that you need to consider whether you could get other government or financial assistance.
You could lock in losses with the sharemarket being down.
You could also (if you reduce a super fund to nil) LOSE valuable insurance cover that you can’t get back..
As the ABC article says:
What you don’t want is 20 years in retirement wishing you’d done things differently all those years ago.
I don’t have answers to Australia’s most vulnerable what they should do instead of taking their super.
Answers like get a loan from a friend or even more extreme sleep on a friends couch or in your car (or even sleep rough) are not real answers for me because I’ve never been close to that situation so I don’t know what I’d do.
But I truly believe in making this decision the Australian government has reduced its today budget required to help the most needy, but will be picking up the tab on the financial and lifestyle impacts for years to come.