This year has been a rollercoaster for financial markets and a lot of people have some concerns about their superannuation and the impacts this might have. The best rule of thumb is to not panic. Now might be a good time to consider whether the risk level you have is right for your age and long term plans and that you aren’t paying too much in fees.
Many people have seen their working hours reduced, or jobs lost due to the public health lockdowns. For those in this group, the Federal Government relaxed restrictions on accessing super, and allowed people to make a withdrawal from their super of up to $10,000 last financial year, and another $10,000 this financial year. There are restrictions in place as to who is eligible to apply for this. You can apply via the myGov website if your working hours have been reduced by 20% or more, you are unemployed or eligible to receive some of the special government support payments, such as the Job Seeker Payment. For sole traders you can access your super if your business was suspended, or turnover dropped by at least 20%.
Many people have accessed their super early to help meet ongoing living costs. You should consider the longer term impact of withdrawing from your super, as over the longer term, you could potentially be doing yourself a disservice by making this withdrawal. The compound effect of interest and returns on investments over time could result in a longer term hit to your super much greater than the $10,000 or $20,000 withdrawn now.
For investors
The market volatility saw global share markets and investments drop in value, before making a reasonable and gradual recovery. We expect this gradual recovery will continue as economies start to reopen. For those who were in a position then, or even now and have had cash on the sidelines that they can afford to leave for a number of years, the drop in value for investment markets has given a good opportunity to gain further exposure to growth assets such as shares and property. Be cautious gambling on the investment markets for the short term and consider adding to longer term investments in a downturn.
For those close to retirement
It’s not hard to feel a sense of panic watching as your retirement savings fall in value. Consider taking a longer term view with your super or investments and making sure that you have money available in your portfolio to cover a “rainy day event”. Having money available as cash based investments will reduce the need to sell down growth assets, particularly when they have dropped in value. Having some cash available gives you time to ride out the short term volatility, allowing your money to participate in the gradual market recovery when it happens.
For retirees
The Federal Government has reduced pension minimums for people in receipt of an allocated pension. This is in an attempt to help preserve retiree’s capital. There is no right or wrong answer regarding this, and whether you should reduce your pension payments or not. If you feel you have surplus income, reducing your pension will help your money work a bit harder for you. If you’re coping ok on the pension you receive, there is no compulsion to change it.
Newcastle Permanent has a qualified team of advisers, ready to provide advice for whatever stage you are in.