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Pros and Cons: Should you withdraw your super now?

Pros and Cons: Should you withdraw your super now? with Money Bites
Superannuation is a gift to your future self.

Bite-Size Read:

  • COVID-19 has led to many people losing their jobs and needing income.
  • You can withdraw your super early if the pandemic has negatively impacted you.
  • We help you weigh up the pros and cons of whether you should withdraw your super now or leave it to grow.


COVID-19 has disrupted life for many people.

ABS data showed that 870,000 people had lost their jobs in Australia in May 2020 and that unemployment hit a 20 year high of 7.5% in July 2020. These impacts can be seen in countries worldwide, as unemployment rates increased globally due to the pandemic.

In this environment, many governments are enabling people to access their retirement savings now. You can access your super in very limited circumstances in Australia, including the COVID-19 early release scheme. One of the problems with superannuation or super is you can only access it at retirement age, despite potentially needing it earlier in life.


So should you withdraw your super early?

The media have portrayed this decision as a wholly negative one. According to these reports, Australians have been ‘splashing cash’ on alcohol and takeaways, despite that same survey showing most money was spent on debt repayments. In fact, official ABS data showed that most Australians used the money to pay their mortgage or rent and household bills

We are not here to judge your decision. There’s many reasons why you may want to withdraw your super early, including losing your job and not being able to pay your bills. We want to talk about the pros and cons of withdrawing your super now to help you make the right choice for you. 






Here are the pros and cons of withdrawing your super early:  





1. PRO: It can help you avoid going into debt

If you’re worried about paying your bills, you may look to use debt products like credit cards or payday loans. However, the early access scheme might be preferable to going into debt, particularly if you are able to get a job and build back up your super balance in the future.





2. PRO: You won’t pay tax on the money

The money released under this scheme is not currently taxed. This could change in the future, but you’ve already paid tax on the super contributions, so you aren’t presently taxed twice as this is a hardship based scheme.





3. PRO: You need to use the money now

The idea of super is it’s there when you’re older, but you might benefit from using the money now. You could use the money in other ways like one couple did when they used the scheme to build their first home.




But you may be better off not withdrawing your super now…





6. CON: You’re robbing your future self  

The whole purpose of retirement funds is to help you not worry about money in your old age. If you take money out of your super account now, you’re effectively robbing your future self to pay yourself today.





7. CON: Women are more likely to have a negative effect  

There is already a gender gap when it comes to retirement savings. Women retire with a retirement fund 47% less than men, so they already have less in their retirement accounts. More money being taken out of super funds early could see this gap widen.





8. CON: You miss on the benefits of compound interest

Compound interest is money building up to add more to the overall total over time. Taking money out of the account means that this money doesn’t accrue compound interest. Projections show if you withdraw $20,000 at 30 years old, that could be worth $49,823 by retirement age.




The choice of whether to withdraw your super early is yours alone to make.

The COVID-19 early release scheme was set up to support people who lost their income due to the pandemic. Make sure you get advice from a financial professional to know what’s right for your individual circumstances. 

Written by Kate Crowhurst

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