I am in my mid 30s and have under $100K in super. If I withdrew $10K of super during the COVID-19 crisis, how could I invest it?
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Hello Kelly, thanks so much for your question.
I can certainly understand the temptation to withdraw some of your superannuation via the COVID19 release option.
You are not alone, as, at the end of September 2020, $33.5 Billion has been withdrawn from superannuation and utilised for many different purposes. Some have used these funds to pay down high-interest debt (such as Credit Cards and Personal Loans), others have kept aside to create a cash buffer (to protect from unforeseen changes to cashflow) and of course, there are others who have taken the opportunity to reward themselves with a new TV, new car or book that dream holiday.
As an adviser, I am predictable in saying funds should not be withdrawn early from super unless absolutely necessary. The obvious question is, why are you withdrawing to invest? Superannuation is an attractive long-term investment environment. If you are considering investing, it appears that you do not have an immediate need. This decision could end up costing you thousands in terms of future retirement savings and depending on your future income potentially result in additional tax.
Given your age, you have many different life events ahead of you which you might be planning for, (some of which you may have already encountered) including; buying your first home, starting a family, promotions etc. There are many different things to consider when deciding where to invest money including (but not limited to) Risk, Liquidity, and Tax to name a few.
If you decide to proceed, a time-based approach may be best, as outlined below:
- If you require access to the funds in the next 12 months – take a conservative approach and invest in something that earns better than 0%. Your money should be available at short notice and not subject to any loss. Examples are High-Interest Savings accounts (often online)
- If funds are required in 1-3 years from now – I would remain conservative, however, if you will not require the funds for at least 12 months, you could give up short term access by entering into a fixed-term investment such as Term Deposits, or other similar type products (potentially mortgage-backed deposits)
- If you do not require the funds for at least3 years+ - This time frame increases your investment options to include shares (Australian and International), Managed Funds and even property, however, they would also be higher risk.
A financial adviser can help you understand the implications of this decision. You should seek professional advice to ensure the decision you make is appropriate to your future goals and current circumstances.
Thanks again for your question, good luck with your future plans.
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