Pros and Cons: Should you withdraw your super now?

Mum and daughter talking about super and retirement

Should you access your super early? You can now access your super fund early if you’ve lost money during COVID. We help you decide whether you should withdraw your super early.

There’s no doubt that COVID-19 disrupted our plans and goals for 2020. It also led to huge numbers of people losing their jobs or having their work hours reduced. One of the ways that the Australian government supported people to access money when they needed it most was to open up the early access to superannuation arrangements to more people to a specific amount of time. In short, you can access cash from your retirement fund now.

This has also meant that there is no shortage of experts coming out of the woodwork to express their concerns at the decisions of others. Most of these experts are middle-aged, homeowners, and have their money situation sorted. At Money Bites, we recognise that not everyone is in that situation and that if you need cash fast, the money you do have is yours to manage. And we’re not alone in that feeling:

79% of Australians are in favour of people being able to access their super

That study by Roy Morgan research shows that Australians of all ages agree people in financial difficulty should have access to their super. It’s your money and your choice and we want to support you to make an informed decision.

Here’s some questions you’ve been asking about withdrawing super:
  • Can I withdraw my super? You’ve always been able to withdraw your super early if you meet the Australian Tax Office criteria. But COVID-19 has meant that more people now meet the criteria for early access to their super.
  • Can I access my super to pay debt? One of the conditions of accessing your super early is being financially worse off from COVID-19 so if you meet the criteria and want to access your super early, you could use those funds to pay off debt.
  • How do I withdraw my super? You must apply through the Australian Tax Office and it’s free to do this. Some scammers are offering to help you for a fee and you should hang up on these calls because they’re scams. You check out exactly how to spot a scam here.
  • How much can I withdraw from my super? You can withdraw up to $10,000 every financial year, with the application period ending 31 December 2020.
  • Do I pay tax when I withdraw my super? The Australian Tax Office says you will not need to pay tax on the amounts you withdraw from your super under this scheme.

So that you can make an informed decision, here are the pros and cons of withdrawing your super early:


1. It’s tax free money

  • Income that you make during the year is normally taxed.
  • The bonus of the payments you withdraw from your super is that you won’t need to pay tax on amounts released early under this scheme.
  • You’ve already paid 15% on super contributions when they go into your super account but this is much less than the average salary income tax rate of 32%.
  • This means that you can withdraw up to $20,000 completely tax free.

2. You can use that money now

  • Super fund money is your money and it might be more useful to you in your life now than sitting in a fund for later.
  • There’s an amazing example of one couple who both withdrew money from their super funds after losing money thanks to COVID-19. And as a result, they’ve bought their first home with no savings or mortgage. You can read more about their story and how exactly they did it here.

3. It’s a good alternative to getting stuck in debt

  • Compound interest is the 8th wonder of the world because you get interest on your interest.
  • If you’re saving money, compound interest is the interest you earn on both the money you deposit in your bank account and the interest you’ve earned.
  • However, if you get into debt, compound interest works for the bank – not you. If you use a credit card and don’t pay off the entire amount by the due date, you are effectively paying compound interest to the bank.
  • If a super fund payment can help you avoid the debt trap then it could be worth it for you.


1. You’re robbing your future self

  • The retirement fund you save is meant to be there to keep the heating on in your old age. You make contributions to this fund throughout your life and its purpose is to sustain your lifestyle when you cannot or decide to not work anymore.
  • If you take money out of your super account now, you’re effectively robbing your future self to pay yourself today.

2. Women are likely to suffer more from withdrawing your super

  • There is a gender gap when it comes to what men and women retire on.
  • According to Women in Super, women currently retire with 47% less superannuation than men.
  • There are growing numbers of older women at risk of homelessness due to not having enough super in their retirement fund to support them throughout their retirement years.
  • While this should not determine your choice, it’s important to bear in mind when making a decision about whether to withdraw your super early.

3. You miss out on the benefits of compound interest

  • If you withdraw money from your super fund, that money will not benefit from compound interest. You miss out on earning interest on your interest.
  • Super Consumers Australia shared that if you’re 30 years old and withdraw $20,000 from your super, this amount would be worth $49,823 by retirement age if you left it in your account.

Whether you withdraw your super early has to be your choice.

How do I decide whether to withdraw my super? 

If you’re struggling with the decision, you can consult the Money Resources page of our website for services that might help you make that decision. In particular, the National Debt Hotline enables you to have a free and independent consultation with a professional financial counsellor and they’re brilliant at helping you resolve financial difficulties. Check it out on the Money Resources page.

While it’s been described as a last resort, if you’re in difficult financial circumstances then withdrawing you super can help you avoid debt traps and meet your financial obligations.

Read more: 5 steps to prepare for a recession

Kate Crowhurst

Written by Kate Crowhurst

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