Your Superannuation – How to rebuild your Retirement Savings
Your Superannuation –
How to rebuild your Retirement Savings
Super savings are for retirement. However, as a result of the financial hardship caused by coronavirus, access to super may be an important way to help you make ends meet at a difficult time. We consider how you can boost and rebuild your retirement savings when your circumstances allow.
Early access to super – important considerations
This is an exceptionally difficult time for many people. Accessing some of your super savings may help you to make ends meet until your circumstances improve. If you’re eligible, you may be able to make an application to withdraw up to $10,000 before 30 June 2020 and another application for a second withdrawal of up to $10,000 from 1 July 2020 to 24 September 2020.
Before you do, it’s important to consider:
• other benefits and concessions that may be available to you to help make ends meet
• the impact on retirement savings
• the impact on other benefits in super, such as insurance, and
• minimum account balance requirements.
The impact of a withdrawal on your future retirement savings will differ based on a number of important variables, including:
• how much you withdraw
• your age and years until retirement
• your investment allocation and future returns
• fees and other account expenses, and
• contributions made to your account.
Boosting and rebuilding your savings
While your top priority at the moment is maintaining the cashflow you need to meet ongoing family and lifestyle expenses, there are some great ways that you may be able to boost your retirement savings in the future when your circumstances change.
It may give you some peace of mind to know that you are able to make what might be a necessary decision today to access some of your super savings to assist you and your family at a difficult time, without compromising your retirement. In the future, even small, regular contributions could be important in getting your superannuation savings back on track for retirement as every little bit helps.
Case Study – Benefits of rebuilding
Greg (50), Peter (40) and Bobby (30) have all recently been impacted by the coronavirus pandemic, having been made redundant or stood down from employment. Each is concerned about the impact that a withdrawal under the temporary coronavirus condition of release will have on their future retirement savings.
Their financial adviser completes some estimates and projections to show the potential impact that withdrawing the maximum of $20,000 (two $10,000 lump sums) would have at retirement, if no strategies to boost their balance were considered in the future. While their immediate financial needs are significant, they want to understand the impact on their ability to fund retirement in the future to make an informed decision.
| AGE | AMOUNT ACCESSED EARLY | REDUCTION IN BALANCE | REDUCTION IN BALANCE |
| AT RETIREMENT AGE (65) | AT RETIREMENT AGE (65) | ||
| ASSUMING A NET RETURN | ASSUMING A NET RETURN | ||
| OF 6% pa | OF 8% pa | ||
| 30 | 20,000.00 | 134,000.00 | 296,706.00 |
| 40 | 20,000.00 | 66,000.00 | 116,696.00 |
| 50 | 20,000.00 | 28,000.00 | 43,433.00 |
Potential impact on future retirement savings
Given each person’s circumstances, their financial adviser suggests to make the withdrawals. However, when the time is right in the future, there are a number of strategies that could be implemented to help get their retirement savings back on track.
Their financial adviser completes some estimates and projections to show the potential impact that withdrawing the maximum of $20,000 (two $10,000 lump sums) would have at retirement, if no strategies to boost their balance were considered in the future. While their immediate financial needs are significant, they want to understand the impact on their ability to fund retirement in the future to make an informed decision.
| BOBBY | Salary Sacrifice: | Approximately |
| AGE: 30 | $20 per week | $77,195 better off |
| Salary: $45,000 | Personal Contribution: | |
| $1000 per year | ||
| Government co-contribution: | ||
| Amount varies, based on | ||
| limits and thresholds | ||
| Peter | Salary Sacrifice: | Approximately |
| Age: 40 | $30 per week | $16,264 better off |
| Salary: $80,000 | Personal Contribution: | |
| Super Balance | $542 using tax refund from spouse | |
| Before withdrawal | contribution tax offset | |
| $120,000 | ||
| Greg | Salary Sacrifice: | Approximately |
| Age: 50 | $100 per week | $80,000 better off |
| Salary: $125,000 | Personal Deductible Contribution: | |
| Super Balance | $1000 every year using bonus | |
| Before withdrawal | received and any tax refund |
We highly recommend you talk to Paul Davis from Account(able) Financial Planners to find out more about how these strategies could work for you or any other issues or concerns you may have, and for advice on your own situation.