Homeowners face financial wipe out from raiding super: analysis
Struggling Aussies face a financial wipe out come retirement if they dip into their super to pay off their home loans faster, economic modelling has revealed.
The warnings come as the country’s financial regulator APRA revealed 3.2 million Aussies raided their super since the onset of COVID-19 to capitalise on relaxed super rules.
The early release of super scheme allows those who have been adversely affected financially during COVID-19 early access to up to $10,000 of their super this year.
The take up of the scheme has roughly correlated with the number of Aussies who became unemployed or were on reduced working hours as a result of the pandemic.
More than $33 billion has been drawn from super funds since the scheme was introduced.
Those intent on tapping into their super over the 2020-21 financial year have until December 31 to apply, but Finder.com.au analysis revealed it should only be used as a last resort for homeowners.
Modelling from the comparison site showed the financial benefits of keeping the money in super outweighed any potential savings incurred from paying off a home loan faster.
Finder insights manager Graham Cooke said most homeowners were better off deferring their mortgage repayments if they were struggling.
“Taking out your super to repay your loan may not be the best option,” Mr Cooke said.
“(It) should be a last resort as the impact on your retirement savings can be far more significant than you might expect.”
A 30-year-old who left $10,000 in a super account will recoup about $22,000 at retirement age, on average, Finder revealed.
But putting the $10,000 into the average Australian mortgage ($479,000, according to the Australian Bureau of Statistics) would save $17,000 in repayments over 30 years.
The end result would be a loss of $4500 in potential savings.
A couple who drew $20,000 in early release payments would lose about double that amount come retirement.
The $20,000 would have delivered $43,613 if left in their super but only save $34,540 in loan costs, a loss of $9073 in potential savings.
Mr Cooke said some Aussies in financial hardship may have considered accessing their super as a “lifeline” but it would ultimately put a big dent in their retirement savings.