If you accessed your superannuation to cope with financial strains during the COVID-19 pandemic, you might be contemplating how to restore your retirement savings. In 2020, the Australian Taxation Office permitted over 3 million individuals to withdraw a total of $37.8 billion from their super accounts, allowing each person to access up to $20,000.
Despite this significant support, many Australians weren’t aware of the long-term repercussions of withdrawing these funds. While withdrawals made during the pandemic did not necessitate repayment, financial experts stress the impact on your super balance. For instance, withdrawing $20,000 could potentially lead to a loss of around $132,000 in retirement savings over the long term, factoring in compounding returns.
The early access program attracted a diverse age demographic, with many adult Australians using the funds for personal expenses like home renovations or vehicles, rather than for urgent financial needs. This highlights the risk of overspending without considering future retirement implications.
As you consider rebuilding your super, timing is vital. The principle of compounding interest emphasises that early contributions generate the most substantial benefits. Financial adviser Ketvi Roopnarain suggests that reinstating funds promptly can help your retirement savings recover over time.
If you withdrew money under the COVID-19 early release scheme, the government allows you to make personal contributions until June 30, 2030, without counting these against your non-concessional contributions cap. However, contributions under this scheme are not tax-deductible, so it’s essential to plan effectively.
To start the re-contribution process, complete the ATO’s COVID-19 re-contribution form and submit it to your super fund when making contributions. You can gradually add back what you withdrew, distributing payments over the next several years for maximum benefit. Utilising tools like the Moneysmart superannuation calculator can assist in estimating your contributions and potential growth.
Remember that while the early release option provided short-term relief, it’s crucial to view superannuation as a long-term investment for your financial security. Reaching out to your super fund for specific advice on re-contribution could also be beneficial.
While the pandemic relief scheme has concluded, accessing your super early remains possible under specific circumstances, such as severe financial hardship or medical issues, but it requires evidence of the situation’s legitimacy. As always, seek personalised financial advice to navigate your options effectively and understand the implications for your unique circumstances.
This discussion serves as a general guide, and engaging with a financial adviser can provide tailored advice based on your needs.