Almost one million Australians have taken the opportunity to withdraw money from their super so far – but far from splurging, they are taking a surprisingly strategic approach.

The average withdrawal from the Commonwealth Bank was  $8,320, indicating people are using the money for specific debts while trying to preserve their nest egg.

Craig Day, Colonial First State’s technical super expert said the figure suggests that Australians are being extremely cautious.

“Rather than taking out the full $10,000, which the industry thought would be the case, it turns out Australians are being very careful.”

The early access to super allows Australians, New Zealanders, permanent residents and temporary workers who have lost their jobs, are ill, been stood down or are in financial hardship, to withdraw $10,000 of their super until 30 June 2020, and a further $10,000 from 1 July to 24 September 2020.

It has been controversial as industry super funds have been keen to dissuade members from withdrawing funds because they earn fees from money under management.

But the biggest controversy has surrounded exactly what it means to super balances and retirement.

One super industry body says a 30-year-old who takes out the $20,000 available to them now, could stand to lose as much as $97,214, and with compound interest, it could be as high as $120,000 if they retire at 67. The Australian Securities and Investment Commission says that’s wrong – it would actually be $43,200.

“The most prudent way is to apply the ASIC numbers on your super fund. The best of the way to look at this is the independent umpire. For someone about 25, they are showing in today’s dollars, you would be losing around $43,000. But the other thing to note is that what does it mean to an income stream in the future,” said Mr Day.

“It is important to understand, the younger you are, the more time you have to repair your superfund. Younger people, when they can, will have to start recontributing by salary sacrificing, for example. For a lot of people, withdrawing their super is not an academic exercise. People need the money.”

But it’s not just the young that also have to be wary of their money. Mr Day said that if you are edging closer to retirement age, you will also have to look at a number of things like – the age in which you retire and retirement income.

“The closer you are to retirement is when you will see a smaller impact in terms of future lost investment earnings. But, bear in mind, you need to examine your financial strategy,” he said.

“If you get good returns early into retirement then generally, it will provide a good level of income throughout retirement. But if you hit negative returns early in retirement, that can have quite a significant impact in terms of long-time of your retirement income revenue stream. For example, if you are someone that is closing in on retirement and is now needing that $20,000. If that is the case, then you will need to review the age in which you retire, as well as your income during retirement.”

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