Finder’s superannuation expert Alison Banney said raiding your nest egg to buy a home is a very short-sighted idea. (Source: Finder/Getty)
The idea of pulling your superannuation out early to buy a home has exploded in popularity amongst young and blue-collar workers. The idea was floated by the Coalition at the election, but it copped a barrage of criticism over how it might impact a whole generation’s retirement down the track.
However, it seems like the allure of property ownership is more important, with RedBridge Group finding 70 per cent of 18-34-year-olds agreed or strongly agreed on digging into their nest egg to buy a home. It was even higher amongst blue-collar workers at 80 per cent.
Finder’s superannuation expert Alison Banney told Yahoo Finance it was a very short-sighted approach to getting into property.
“Retirement is a long way away for people in their 20s and 30s, so I get it… it is frustrating to think there’s money sitting there that you can’t use,” she said.
“But I think if we reframe it to be a really good thing that it’s locked away and it’s forced savings.
“It’s going to grow to a huge pile of money that we’re really going to need. It’s in your interest to not only leave it alone, but probably add to it.”
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A recent RedBridge study found support for the idea, across the board, now stands at 60 per cent, which is 10 percentage points higher than last year.
Those pulling in less than $1,000 per week were more likely to support the idea compared to higher-income earners (more than $3,000 per week) at 65 per cent versus 50 per cent.
It was a similar story for people not working compared to full-time workers (70 per cent versus 60 per cent, respectively), and those who didn’t finish high school compared to those with a university degree (67 per cent versus 50 per cent).
Support for the idea was much lower with older age brackets, with only 57 per cent of 35 to 49-year-olds agreeing or strongly agreeing, 58 per cent of 50 to 64-year-olds, and 52 per cent of people 65 and over.
But Aussies aren’t keen on the concept for other big life purchases like a car, with 57 per cent disagreeing or strongly disagreeing.
The idea was heavily discussed earlier this year when the Coalition pitched the concept of letting people take up to $50,000 of their nest egg for a deposit for a home.
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Then-party leader Peter Dutton said homeownership had become “beyond reach for too many” due to soaring property prices, and the Australian dream shouldn’t be “limited to those who can rely on the Bank of Mum and Dad”.
According to Cotality data, property values in capital cities have increased 33.6 per cent from March 2020 to this year.
Combined regional areas also saw home values rise by about 56.3 per cent.
But experts suggested accessing your superannuation as a solution to getting ahead of this trend would only make the situation worse.
If a massive cohort of buyers suddenly had access to $50,000 for a deposit, asking prices could jump by a similar amount.
A study conducted by the University of South Australia and the Super Members Council found the idea could increase house prices by between 7.4 per cent and 10.3 per cent.
That could translate into capital city median prices jumping by up to $92,500.
Council analysis revealed that a 30-year-old who took out $35,000 from their super today would retire with $195,000 less in today’s dollars.
To help first-home buyers get into the market, the government has brought forward the expansion of the 5 per cent deposit scheme from January 1 to October 1.
Finder research released last month found that while 40 per cent of Aussies said they wouldn’t touch their super if they had the option to access it early, others would funnel it towards their current money problems.
About 15 per cent said they would use their super to buy a home for themselves, while 10 per cent would put it towards easing cost-of-living pressures.
Another 8 per cent of Aussies would use it to pay down their mortgage, while the same amount would spend it on a holiday.
Finder’s superannuation literacy expert Pascale Helyar-Moray told Yahoo Finance it showed just “how tough the cost-of-living crunch is right now”.
“Raiding your retirement savings might solve a problem in the short term, but it could leave you significantly worse off in the future,” she said.
You can generally access your super when you retire and reach 60 years old.
If you haven’t yet retired, you can also access it when you hit 65.
There are limited circumstances when you can access your super early.
These include compassionate grounds to pay for expenses like:
Medical treatment (including terminal conditions)
Funeral expenses
Preventing you from losing your home
Being unable to work due to incapacity
Severe financial hardship (the maximum amount that can be withdrawn is $10,000)
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