Financial Hardship and your Super
When you hit hard financial times you might be tempted to access your super fund early to help relieve the pressure. There are certain circumstances under which you can access your Super Fund early. If you are struggling with medical expenses of face losing your house, you might be able to access your Super. Some Super Funds will even release a percentage of your super early if you are in severe financial hardship. But is your current financial situation worth sacrificing a chunk of your retirement plan? We look at how and if you should access your Super early to help with debt.
What is Superannuation?
Superannuation is a way for you to save for your retirement. Your Super Fund is set up when you get your first job and your employer will pay contributions to your Super throughout your career. When you retire, you will have a reasonable financial fund to rely on. You can also make your own contributions to your Super. Depending on your Super Fund, a percentage of your savings might be invested in stocks, in the hope your investments will bring back a higher return and boost your fund.
In Australia, you can not access your Super before you are 55 years of age. However, each fund may allow you to access your Super early through special concessions.
Early Release of Superannuation
There are hundreds of Superannuation Funds and each of them have their own rules when it comes to releasing super funds early. There are a number of specified compassionate grounds which you can apply to access your Super early. These compassionate grounds are:
- to pay for medical or dental treatment for yourself or a dependant. This can also include paying for the transport to the treatment.
- to modify your home or vehicle to accommodate a severe disability for yourself or a dependent
- to pay for palliative care if yourself or a dependent has a terminal medical condition
- to pay for expenses associated with the death, funeral or burial of a dependent
- to prevent your home from being sold by the lender that holds the mortgage
These specified compassionate grounds may be of assistance when your financial hardship is caused my illness or injury in yourself or a dependent. In addition to these compassionate grounds, some Super Funds might allow you to access your super early in cases of severe financial hardship.
Severe Financial Hardship and your Super
Depending on your Super Fund, you can apply for early release of your super on the grounds of severe financial hardship. Before you apply with your Super Fund, you need to consider a number of issues:
- The early release of superannuation may impact the benefits you receive through Family Tax Benefit, Child Care Benefit or an income support payment, among others.
- Your Super Fund might charge you fees to release the money early.
- The money your receive as an early release of your super may be taxed.
- You might struggle closer to retirement with depleted Superannuation Savings
Not all Superannuation Funds allow you to access your Super early on the grounds of Severe Financial Hardship. Even if it does, you should pursue all other avenues first and only attempt to access your Super if advised by a Financial Counsellor. You can speak to a Financial Counsellor in your area for free by calling 1800 007 007.
Applying for early release of your Super
If you are struggling with severe financial hardship and a Financial Counsellor has recommended you try to access your Super early you need to contact your Super Fund. Each Fund will have a different procedure to access your Super early. Many of them will ask for a supporting letter from the Department of Human Services as well as asking you to complete forms and sign agreements. You may need to provide supporting documentation to prove your state of affairs
Alternative Debt Relief Solutions
If it is unrealistic or impossible for you to access your Super early to relieve your debt stress, there are a number of alternative debt relief solutions. If you have a mortgage with some equity in your home you might be able to refinance and consolidate your debt. You might be able to enter into financial hardship arrangements with your creditors, negotiate an informal Debt Agreement or enter a Part 9 Debt Agreement.
If all else fails, you could even declare bankruptcy and keep your retirement plan intact. To discuss your options with an expert, you can call Debt Rescue on 1800 00 3328. They will go through your situation and inform you of your options. You might find there is a simpler way to get out of debt without having to rely on your retirement plan.