Accessed Super Early? How to Rebuild

June 1, 2022
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The core purpose of superannuation is to provide a nest egg in retirement. Creating less dependence on Government support and more financial independence and lifestyle choices for individuals.In an attempt to ease some of the financial hardship caused by the impact of COVID-19, the Government has approved early access to superannuation, an important initiative to help make ends meet during uncertain times.If eligible, initial applications may be made to withdraw up to $10,000 before 30 June 2020. And up to another $10,000 between 1 July and 31 December 2020.

Early withdrawal considerations

Before accessing super, it is important to consider:

  • What other benefits or concessions are available to you in this time of financial hardship?
  • What will the impact be on retirement savings?
  • Will this impact other benefits in super? Redeeming down to a certain level may cancel insurances.
  • What are the minimum account balance requirements?

What are the impacts?

The impacts of withdrawal on future retirement savings is dependent on a number of variables.These include:

  • How much is withdrawn;
  • Age and years to retirement;
  • Investment allocation and future returns;
  • Fees and other account expenses;
  • Any contributions made to the account.

Boosting and rebuilding

While the current focus may be keeping one’s head above water, when circumstances change and potential income returns, there are a number of ways to boost retirement savings.Small, regular contributions can be important when getting superannuation savings back on track.When it comes to super, the sooner action is taken, the higher the chance of getting super savings back on track.Ways to boost and rebuild super include salary sacrifice, receiving government co-contribution, making or receiving spouse contribution, making catch up concessional contributions and making personal contributions to claim a tax deduction.

How do these strategies work?

There are a number of key contribution strategies that may boost and rebuild retirement savings. Before taking any action, RJS recommends seeking professional advice from a professional, who will tailor recommendations to your personal circumstances.1. Sacrifice pre-tax salary to superThis strategy may be appropriate for those who have sufficient cash flow to divert some of their pre-tax salary to superannuation, rather than as take-home pay. Making additional voluntary contributions to super will help rebuild the account balance however it is an out of pocket expense which should be acknowledged. These tax effective super contributions can also boost cash flow by reducing the assessable income.2. Government Co-ContributionThose who earn less than $53,564 pa can make personal (after-tax) super contributions up to $1,000 pa (less than $20 of the weekly budget). If requirements are met, the Government will contribute $500 into your super account. The amount received is dependent on income and the total annual personal contributions made.3. Spousal ContributionsWhere one spouse earns less than $40,000 pa, the higher earning spouse, may make a super contribution on their behalf. This may enable a tax offset of up to $540 depending on the contribution amount.4. Personal ContributionsPersonal contributions are made after-tax, from take home pay or savings. These payments are non-concessional and can be made regularly or closer to the end of financial year rather than committing to regular payments.5. Catch-Up Concessional ContributionsIf the annual concessional contributions (CC) cap has not been fully utilized since 1 July 2018, you may have accrued unused CC’s, allowing larger contributions in a future year. Unused CCs can be carried forward for up to 5 years, however there is a maximum superannuation balance of $500K on 30 June the previous financial year.Read more on super strategies in our fact sheet here.While retirement may still feel like it’s a while away, with correct preparation it can be possible to achieve the lifestyle you deserve.Are you taking the right steps towards a comfortable retirement? Let us help steer you in the right direction. Talk to our Strategic Wealth Planners and schedule a consult by clicking here.This blog has been prepared by RJS Wealth Management Pty. Ltd. ABN 24 156 207 126. RJS Wealth Management Pty. Ltd. is a Corporate Authorised Representative (No. 438158) of Modoras Pty. Ltd. ABN 86 068 034 908 an Australian Financial Services and Credit Licensee (Number 233209). The information and opinions contained in this blog is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individual’s personal circumstances have been taken into consideration for the preparation of this material. Any individual making a decision to buy, sell or hold any particular financial product should make their own assessment taking into account their own particular circumstances. The information and opinions herein do not constitute any recommendation to purchase, sell or hold any particular financial product. Modoras Pty Ltd recommends that no financial product or financial service be acquired or disposed of or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this blog can change without notice. Modoras Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication.

June 1, 2022

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