Has COVID-19 impacted your super?

Why should you care if COVID-19 has caused a market crash? Well, your super fund has probably taken a hit too — but what does that mean?

You might have heard that financial markets have taken a hit during the Coronavirus (COVID-19) crisis. Should you be concerned? Well, even if you don’t have shares, or you’re not in a position to invest just yet, have you thought about your superannuation? Most funds invest in the share market, so when it takes a hit, so does your super balance.

This doesn’t mean you should panic and start checking your super balance every day. In fact, accountant and financial coach Melissa Browne thinks you should apply social distancing to your super.

“Too many people in their 20s, 30s, and 40s are losing their sh*t about the share market. And their super. When the truth is, you have time, so the current dip should mean absolutely nothing to you.”

So what’s going on right now, and what should you do about it?

Keep calm and carry on

Share markets around the world have all taken a hit as countries close down their economies in order to fight the spread of COVID-19. Australia took its biggest hit in mid-March, right around the time the Federal Government announced the first major closures.

ASX movement in the 6 months until April 2020

Super funds around the country also took a hit, as most invest in Australian and international shares to help grow your retirement savings for the future. The uncertainty around the current crisis and its economic impact means the market is set for a bumpy time over the next few months, if not years. So, what should you do about your super?

If you don’t plan to retire in the next 20-30 years. and you’re still receiving contributions (or will again in the near future), you’re unlikely to feel any major impact in the long-term and there will be time to make up for any losses. It might be a good time to avoid constantly checking your balance as it’s likely to fluctuate daily, which could make you feel anxious or uncertain about your investment.

Thinking of withdrawing your super early?

If you’ve been financially impacted by COVID-19, you might be considering withdrawing from your super as part of the Government’s early access scheme. When making this decision, it’s important to understand the impact a decision to withdraw super now will have on your future retirement savings.

Withdrawing from your super now means you’re cashing out during an economic downturn. This means you’ll crystallise any losses, cancelling out any chance to make those losses up when the share market recovers.

It’s also possible that a significant withdrawal now will leave you with less money in retirement. If you’re after a general idea of how withdrawing from your super now may impact your retirement, MoneySmart has a calculator to help. As an example, if you’re 25 and plan to retire at 65, withdrawing $10,000 could mean losing approximately $22,887 in retirement savings.

Make sure that you have explored all financial assistance options that may be available to you. Have you reviewed all the other stimulus options available from the government? Have you reached out to your banks, energy company, phone and internet provider to ask for financial assistance? 

Applying social distancing to your superwill give you a head start to supporting yourself in retirement.

Information provided in this article is of a general nature only and we have not taken your personal financial objectives, situation or needs into account. We recommend you consider if you need to seek professional financial advice before making any financial decisions.