Is it a good idea to take out the 10k super and put it towards property?

As an older person who is closer to the grave than some here without offering an opinion on withdrawing super early to invest in property or anything else I will just clear up one point. As the rules are now, super can be accessed at 55 its the government pension at 67. So withdrawing super from 55 and hopefully living until 85 or more that is at least 30 years my super has to last if I am not going to rely on the government coffers

 

Luckily when I turned 18, earning my own money and moved out of home, my parents suggested I start putting money in a managed fund so I would have some sort retirement fund as there was no forced super savings 26 years ago.
I will use that managed fund money, that I still contribute to, for my retirement super ( as well as separate income from property and share investing)
The super I have been getting for the past 22 years while working in Australia I was not expecting 26 years ago and I will access this Australian super as soon as can for my own sensible use.
Next 10k coming out 1st July if my current circumstances are similar at that date.

 

Glad that's worked well for you, sir. However the age to be able to access super has already been increased to 60 based on the year one was born. By the time I get to that point, they'll probably change it to at least 65.

Based on my grandparents track record, there's a good chance I'd never see my super.

 

Yes but this is a property investment forum. Most of us are a bit beyond basic personal spending habits 101.

Plus the original question was whether to take it out and put it towards property.

 

Where else would you invest it for better long term results, taking account for the tax benefits of super?

The next few years in super would also see those same buying opportunities, especially if you are salary sacrificing now. Seems like it's just moving your eggs from one basket to another with no real benefit, only speculation.

 

Super has 2 benefits
a) a low tax environment, leading to greater compounding, and
b) you cannot touch it until a condition of release, avoiding temptation to double dip - spend it up and the get the pension. (except for now)

 

I believe if you can take out your super to pay down debt or invest with it then 100% do it. The whole point of me investing in property is so I don't require my super once I retire. So yes I did access my super and will be doing the other 10k once July hits, this will be going towards my next house deposit. I qualify because my work hours have been reduced from 110 a fortnight to 84 (normal full time) so I'm kind of lucky in that regard. I'll also be going back to 110 once July 22 hits if the plans stay the same so will still qualify for any loans towards end of year.

 

Yep
Unpopular opinion but imagine putting that 20k towards say a 300k house that you pay off and its giving you 330 a week cashflow or a townhouse and your still in your 20s or 30s your probably better off doing that and achieving your level of financial freedom or just a more comfortable lifestyle rather then waiting till your 60plus to get your super

 

Have you spoken to a broker/lender? I only ask because I was talking to a broker who claimed that lenders are seeing these superannuation withdrawals as hardship - some people seemed to think they were smart withdrawing their super, only to find that withdrawal is impacting their ability to obtain loans. I'm not a broker, nor do I work in finance, so I suggest you research it yourself just to be on the safe side.

 

Possibly, but I personally wouldn't be buying right now anyway. Keep that cash ready and bounce when things begin/start to return to normal. By that time, if you have a job and the economy starts moving again, I'm sure lending wouldn't be too tight.

 

Nah I haven't. I'm still 5 months away but there are many lenders out there and if 1 doesn't want my money or business I'm sure another will.

 

If you spend 1 year saving 20k, you can do the exact same thing, and you won't be out 2-300k at retirement. If you take from super, your trading the compounded growth over that time for 1 extra year of rental income.

 

I don't agree with this logic at all.

Otherwise why do we even bother investing in property? We should just all save money and put it into super instead.

 

i think people assume that $20k will compound to $2-300k but anything else you put it into
, of course that property or shares is going to do the same thing over 30yrs

 

Assuming super investments outside of super are invested in the exact same assets they should go and compound the same, but there will be a tax difference each year which affects the compounding.

Tax could be nil outside or it could be 47% or somewhere in between. In super it could be 15% tax or 10% CGT. So for many super would compound more because less tax, but if you can manage the tax to under 15% it could be compound more outside of super.

Another factor is the leverage. It can be more easily done outside of super.

And then there is leverage against the growth. When a property outside of super grows there is useable equity which you could borrow against for further property or shares. THis can't be done in super.

One more thing is debt recycling, you can use investments outside of super to help pay off non-deductible debt so you can leverage into more assets.

And, serviceability will improve as well outside of super.

 

Well our money in super is already invested, by taking out, your locking in possible losses due to the current market - you may have put in $25 or 30k over the years for you to be able to take out 20k now.

 

OR,
<and please correct me if anything below is incorrect>
- you could take out the 2x10k, and it would only have been taxed at 15%.
- invest that $20k however (in my case I'm thinking debt recycling into shares)
- OPTIONAL STEP: salary sacrifice into super to catch back up with that $20k you have taken out, which would also be taxed at the 15% instead of your marginal rate, having the effect of accelerating that saving

so, the effect would be to bring forward the investment activity, taking advantage of depressed prices of shares RIGHT NOW, while also taking advantage of the tax benefits of super to replenish the funds quickly. For me it would also reduce my non-deductible debt, and build on our outside-of-super investment income stream.

Like any investment "strategy", it is still dependant on saving rate and doing something sensible with extra cash...

Any observations or criticisms on the above?

cheers,
Inertia.

 

Hi , how much a year extra can you contribute to super ? And the amount you contribute gets taxed at no more then 15% ?

 

The threshold is $25k including company contributions

 

There are concessional and non-concessional contributions and catch up concessional contributions - where unused contribution caps can be used for up to 5 years in some cases - could mean $100k could be contributed in some circumstances.