Withdrew super in COVID? It could cost you $43k. Here’s how to recover.
More than 3 million Australians made an early withdrawal from super during COVID. If you were 1 of them, here's how to help your balance recover.
New data from the Association of Super Funds of Australia (ASFA) has revealed more than 3 million people accessed the government's early superannuation withdrawal scheme throughout 2020. This scheme allowed you to withdraw up to $20,000 from your super during COVID, to help cover living expenses while many people were out of work.
Who accessed this scheme, and for what?
Almost half the applications made for an early release of super were by people under 35. However, there were still 85,000 applications made by people aged 61–65.
The money was spent in the following ways:
- To pay for rent or mortgage (28.7%)
- To pay for household bills (26.5%)
- To pay for credit cards or personal debt (14.7%)
- Bought or paid off a vehicle (5.8%)
- Added to savings (12.6%)
- Other (11.7%)
Impact on super balances
According to the ASFA data, 25% of early-release payments were made by people with less than $1,000 in super. Even more worrying, 163,000 people had nothing at all left in their super fund after making an early withdrawal under this scheme.
The impact on your balance would depend on many factors including how much you took out, your age, income and which super fund you're with. Here's how much the ASFA estimates it'll cost over the long term.
| Age | $10k withdraw | $20k withdrawal |
|---|---|---|
| 30 | $21,516 | $43,032 |
| 40 | $17,512 | $35,024 |
| 50 | $14,253 | $28,506 |
As you can see, the younger you are the bigger impact an early withdrawal would have on your balance. A 30-year-old who withdrew the full $20,000 is estimated to be $43,032 worse off in retirement.
How to recover your super balance
You can recover your super balance after making an early withdrawal by making extra voluntary contributions when you're able to do so. With the cost of living skyrocketing and household budgets getting tighter, this doesn't need to be right now. But the earlier you begin, the better.
Research by QSuper, part of Australian retirement Trust, shows if you're under 40 years of age it's possible to recover a $10,000 withdrawal by making after-tax contributions of $10 to $15 a week until retirement. If you instead wait until you're 50 years old, it's around $20 per week.
If you want to recover the money you took out of super quickly, you'll need to make bigger contributions. If you withdrew $10,000 and you want to recover this in your super balance within 5 years, you'll need to contribute $45 a week in addition to what your employer pays you. If you want to recover the money in 10 years, you'll need to make weekly contributions of $26.
Making extra super contributions is just one way to help your balance grow. Consolidating your super if you've got multiple funds and switching to a high-performing, low-fee super fund will also help you retire with more.
