Early access to super savings, for some individuals, is the way to go. This may be necessary before retirement due to financial hardship or other unforeseen circumstances. Superannuation is a vital component of retirement planning in Australia, with millions relying on their superannuation savings to support them in their golden years.
As we move into 2023, many people are facing financial challenges due to Covid-19 impacts and economic factors. Early access to superannuation has become an important option for those in need of financial assistance. However, it’s crucial to understand the pros, cons, and considerations before making a decision that could impact your retirement savings.
Are you planning to access your superannuation savings early?
Depending on the grounds for release and your age, it’s important to note that accessing your superannuation savings early comes with a significant cost
If you are considering accessing your superannuation savings early, it’s important to seek professional advice from your accountant, a financial advisor, or a superannuation fund trustee. They can help you understand the implications of early access and assist you in making an informed decision.
The government allows for early access to superannuation under certain conditions:
Financial Hardship Provision
The most common way to access your superannuation savings early is through the ‘financial hardship’ provision. To be eligible for early release on the grounds of financial hardship, you must receive government income support payments for 26 weeks with no gaps. You must have been unable to meet reasonable and immediate family living expenses.
Compassionate Grounds Provision
Another way to access superannuation early is under the ‘compassionate grounds’ provision. This allows individuals to access their superannuation savings to pay for expenses. Some of which are related to a serious illness or injury, or to pay for the funeral expenses of dependent and other unavoidable circumstances.
5 key points to consider when you want to have early access to your super
- Eligibility: Understand the criteria for early release of your superannuation and ensure you meet the requirements.
- Tax implications: Be aware of the tax consequences of early access to your superannuation, which may include a tax rate of up to 22% on the amount withdrawn.
- Impact on retirement: Consider how early access to your superannuation may affect your retirement savings and the ability to maintain your standard of living in later years.
- Supporting documentation: Gather the necessary documentation required to apply for release, such as medical certificates, proof of debt, and other documents.
- Professional advice: Seek guidance and advice from a financial advisor or a superannuation fund trustee to understand the implications of early access and to make an informed decision.
While early access to superannuation in Australia may be necessary for certain circumstances, it’s important to understand the costs and implications of accessing your savings early. By seeking professional advice and considering all options, you can make an informed decision that best suits your needs.
Accessing your superannuation savings early is a serious decision that should not be taken lightly. It’s essential to understand the costs and implications of early access and to consider all options before making a decision. If you’re facing financial hardship or other unforeseen circumstances that make early access to your superannuation savings necessary, be sure to seek professional advice from an SMSF Expert.
With Wardle Partners Accountants & Advisors, our SMSF team can help you understand the implications of early access and assist you in making an informed decision that is in your best interest.
Remember that the goal is to make sure you have enough to support yourself during your retirement years, and any decision that may compromise that goal should be considered with caution. Talk to us now!