The Top 5 Super Questions Real Estate Professionals Have During COVID-19
The REI Super team have been hitting the virtual pavement since lockdown, connecting with employers to listen to how these uncertain times are impacting the real estate profession and providing superannuation guidance.
From these conversations, REI Super have collated the top five questions being asked during these difficult times.
Q: There’s been a lot of volatility in the stock market since COVID-19 started. What should I do if I’m close to retirement?
A: Speak to your super fund or your licenced financial advisor. Many factors need to be taken into consideration such as (but not limited to):
- Your eligibility for a full/part pension;
- Your balance;
- Plans in retirement; and,
- Life expectancy.
If you’re over 55 years, there may be a better way to access your superannuation. By easing back on your working hours, you may be able to transition to retirement by drawing on some of your super early to top up your income. Find out more about transitioning to retirement. Now isn’t the time to wing it and make a panicked decision. Most people are retired for a long time and historically the markets have bounced back higher than before. If you don’t want your super as a lump sum at retirement you may well have time to wait for the recovery.
Q: Retirement is a long way off, but investment returns are concerning me. Should I switch my investment choice?
A: That depends on your appetite for risk. During the Global Financial Crisis (GFC) people who switched out of balanced and into cash crystallised their losses. Super is a multi-decade investment and this is just one downturn you will experience in the 50 or so years of your working life.
As REI Super CEO, Jarrod Coysh said, “changing investment strategies during a downturn can prove risky. Research has shown that investors who attempt to ‘time the markets’ by frequently switching investments generally perform badly over the long-term. At the last major market decline – during the Global Financial Crisis (GFC) – Industry Super Australia found that savers who moved their money from an average balanced industry fund into cash were:
- $4,000 worse off after three months;
- $13,800 after a year;
- $34,800 worse off after five years; and,
- After seven years would have lost a whopping $46,000 of potential retirement savings.”
History shows after every trough the peak is higher yet again – just like the housing market. If you’re considering changing your investment strategy, make sure you speak to a licensed or appropriately authorised financial advisor before you take action.
Q: I’ve lost my job/had hours dramatically cut. What are the implications to my retirement if I take $20,000 out of my super?
A: While it might seem like a good idea now to take $20,000 out of your super, the impact at retirement could potentially be quite severe. See below on what this could mean for you*.
- A 20-year-old who accesses the full $20,000 available under the scheme could lose more than $120,000 from their retirement balance;
- A 30-year-old who accesses $20,000 from super now could lose about $100,000 when they retire; and,
- A 40-year-old could lose more than $63,000.
*the above examples are taken from Industry SuperFunds: https://www.industrysuper.com/assumptions/
Making use of the early release may be the thing to do after exhausting all other avenues such as JobKeeper, JobSeeker, home loan repayment pauses and the like. But before you do please speak to us or your financial adviser to find out the impact of doing so.
Q: Is there anything else I should be concerned about with taking advantage of the early release?
A: Yes, be very careful about your insurance being inadvertently cancelled should you fall ill during this crisis. Withdrawing super early may also affect a person’s income protection insurance and life and total permanent disability insurance cover if they fully withdraw or have a balance below $6,000.
Q: I work in real estate and have people coming to me in hardship. It’s okay to suggest they should access their super, right?
A: No. Super is very heavily regulated and only suitably qualified people can provide advice, such as their super fund or licensed financial advisor. There are serious implications for the person taking out their super and also serious consequences for those providing unqualified advice. Please refer to ASIC’s letter to real estate agents. We would suggest that those in hardship look into the wage stimulus measures the Federal Government have released such as the JobKeeper and JobSeeker payments, and they can also contact their Super Fund to enquire about ways of accessing super early as a last resort.
Keep up to date with information relating to COVID-19 and your super via the REI Super Information Hub which is updated regularly as the situation changes.
Disclaimer: In presenting this information REI Super has not considered any individual person’s objectives, financial situation or particular needs. Individuals need to consider whether the advice is appropriate in light of their goals, objectives and current situation. Members should obtain and read the Product Disclosure Statement for REI Super before making any decisions and consider talking to a financial adviser before making an investment decision. Past performance is no indication of future performance.
This information has been prepared and published by REI Superannuation Fund Pty Ltd ABN 68 056 044 770 RSE L0000314 AFSL 240569. REI Super ABN 76 641 658 449 and RSE R1000412 MySuper unique identifier 76641658449129 for the general information of members of REI Super.
Although REI Super makes every reasonable effort to maintain current and accurate information, you should be aware that there is still the possibility of inadvertent errors and technical inaccuracies. The REI Super Helpline and the REI Super website are provided by Mercer Outsourcing (Australia) Pty Ltd ABN 83 068 908 912 and Mercer Financial Advice (Australia) Pty Ltd (MFA) ABN 76 153 168 293, Australian Financial Services Licence (AFSL) #411766. April 2020.