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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Thank you for your question.
This is certainly a hot topic at the moment, with many Australians considering withdrawing money from their retirement savings under the Covid-19 early release of superannuation.
The government’s intention for granting access to this money was to help those who need to use these funds as a last resort of being able to meet their expenses.
A question I would pose is, why are you considering withdrawing this money to invest outside of super?
Superannuation is forced savings for your retirement and can also be a very cost-effective way to invest. It is also one of the most tax advantageous structures in Australia.
There is a wide range of well-diversified and viable long-term investment options available to you within superannuation. Most things you can invest in outside of super, you can invest in within your superannuation account depending on your account provider. It may be worth getting advice on your current superannuation account and different investment options to consider.
Withdrawing this money from super could affect your retirement balance by a substantial amount over the long term. You could have look at Money Smart's information surrounding this.
Should you decide to withdraw this money, it would be appropriate to seek financial advice on investment options as there are many things to consider. Such as your financial goals, investment time frame, when you would require access to the investment, tax implications and the appropriate level of risk.
If you planned to fund a deposit for an investment property or mortgage with this money it may not be a viable option, as many lenders are declining loans if some or all of the deposit has come from a Covid-19 early super release. The reasoning behind this is, eligibility for this withdrawal may mean you are under considerable financial stress now or into the future.
If you required access to your investment money in the short term 1-4 years, more defensive options may be appropriate such as Term Deposits, High-Interest Cash Saving Accounts, or other fixed-term investments.
If you do not require access to these funds for over 4-5 years a longer style investment option allows you to consider higher-risk investments, such as Shares and Managed funds.
To conclude, withdrawing $10,000 from your super solely to invest may not be the most appropriate strategy as superannuation is a very viable and tax-efficient investment vehicle.
Before you take the next step, I would seek out further advice from a financial planner. This will allow you to make sure any decisions reflect your current needs and financial goals for the future.
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