When is it ok to access your super early?
Normally you’re not allowed to access your super until you reach the minimum age set by law (preservation age) and you permanently retire from the workforce.
But there are some circumstances where you are can apply to have some of the money in your superannuation fund released before you’ve reached this point.
We’re going to take a look at the circumstances where it’s alright to access your super early, and what you need to do to make it happen. It’s important to remember however, that you may be required to pay tax on any super that’s released early.
Grounds for early release of super
Many super funds will allow their members to access a lump sum once every two months, if the request is based on one of the following grounds.
- Compassionate grounds – specified circumstances to prevent the sale of your home by mortgagee, or to pay medical, disability of funeral expenses.
- Severe financial hardship grounds – to meet reasonable immediate living expenses including loan repayments, rent arrears, outstanding bills, car repairs and medical expenses.
How to apply for early release
If you’re applying on compassionate grounds you will need to contact the Department of Human Services and have your case reviewed. Once you have the approval you can go back to your super provider. That being said, it’s important to remember that your super provider is not obliged to release your funds if their policy disallows early access.
If you’re applying on grounds of severe financial hardship you can go directly to your super fund but you need to confirm that you have been receiving certain Centrelink allowances and have insufficient money to meet immediate living expenses.
Is it worth doing?
Well, as with any other circumstance in life there are advantages and disadvantages that come with requesting an early withdrawal of your superannuation.
Getting early access to your super can help you manage debt when in a serious financial bind without having to take out any additional loans. Odds are as a result you’ll feel in greater control of your debts and under less stress when reducing those.
There are some serious disadvantages to access your super early however, that you need to be aware of. Funds released prior to retirement are taxed at a higher rate, super funds may charge a service fee for being able to access your funds early and unless the sums pays off all your debts, you may lose all your money and still owe your creditors.
It’s recommended you seek financial advice before exploring such a move. While it can get you out of a tricky bind, it can potentially leave you in a bigger mess.
Related links:
Australia needs retirement income diversity
Aussies forced to raid inheritance to fund retirement
Why many retirees are choosing to sell their own home