Super cash-out not a smart play

TRUTH TR be told, Australia was one on of the least prepared countries co for this crisis.

That’s because the average Au Aussie household is sh shouldering some of the hi highest household debt in the wo world and has skint savings. Half of us have less than $7000 in the bank, according to the Grattan Institute.

So for those people who ha have lost their jobs or their sm small businesses, the go government is offering you a gamble. They’ll let you take up to $20,000 from your super, tax-free, to live on. Specifically, it kicks off with $10,000 mid-April, then you can request another $10,000 in the new financial year.

To access the dough, you need to be unemployed, or getting a Centrelink payment like youth allowance, or have had your working hours or business income reduced by at least 20 per cent.

On the upside, you’ll have money to tide you over for the next few months. On the downside, you could be putting your retirement at risk. So what should you do?

Well, there’s a saying in poker: You’re not really playing the cards, you’re playing the other players.

So let’s see who’s sitting around your table. First, you’ve got your bank. They’ve been dealt a really bad hand. That’s why they’re giving their affected customers up to a sixmonth ‘pause’ on their home loan (and in reality, all their debts).

Next to them sit your utility providers and telcos, who will offer payment arrangements.

Finally, there’s your landlord, and it looks like they’ll be forced to go easy on renters in financial difficulty.

In other words, if you’ve lost your income, you can put on your poker face and call their bluff. All you need to do is contact their hardship department (pro tip: email them, their phone lines will be jammed), and explain your situation, preferably with written evidence.

So, should you still take the $20,000 from your super, just in case? No.

You may think you’re cashing in $20,000 of your super money, but you’re really not. If you’re 45 years old, that $20,000 would be worth $50,000 by the time you retire. If you’re 35 years old, it’s an $80,000 decision. And if you’re 25 years old, you’re really gambling with $132,000!

Why? Because you’re cashing out your investments during a share market crash, where the price of stocks are 25 per cent cheaper than they were a few months ago. You’re selling out cheap. And history tells us that over the longterm, the stock market always goes up — through panics, pandemics, depressions and recessions and wars. Always.

So before you cash out part of your retirement savings, make sure you have exhausted every last option.