July means a second opportunity to get your mitts on $10,000 of your retirement savings.
More than 2.5 million Australians applied for the first $10,000 COVID-19 hardship payment from their superannuation, which was available until June 30. The Australian Prudential Regulation Authority estimates the average withdrawal was $7486.
To be eligible, you must have seen your income drop by 20 per cent or more. Second-round applications are via myGov (closing September 24), amounts are untaxed and don’t affect Centrelink benefits.
Sound good? Well let me sound a big warning: "future you" would be much poorer for it if you decide to milk your retirement savings.
A 30-year-old would pay five times the price in lost super at retirement; the full $20,000 hardship payment could cause a $100,000 detriment, says Industry Super Australia analysis. And sadly, most people who availed themselves of the initial $10,000 opportunity were under 40.
Remember, market volatility may already have significantly hurt your super balance this year.
However, if you really do need a cash injection to tide you over these tough times, don’t risk your financial future by raiding super. Consider following this step-by-step strategy instead.
Get a tax refund every pay packet
If you wait every year for what you have overpaid in tax in a lump sum, why? You can get this in every pay by filling out a withholding variation form.
Cash boost: The average refund the Australian Taxation Office paid last year was $2381. This year, it will be bigger, with many people working from home and claiming extra work-related expenses.
Bail up your health insurer
One of my Facebook followers reports: “I rang HCF this week to get information for my tax return. While I was on the phone, they mentioned that HCF will pay the premiums for members affected by COVID-19.” Winning!
Cash boost: For this family, $1100.
Lots of discounts
Through state-based automobile clubs and The Entertainment Book (usually about $70 from your favourite charity), you can purchase WISH eGift cards for 5 per cent off. These are redeemable for any Woolworths-owned enterprises – so for food (Woolies itself), booze (BWS; Dan Murphy’s; Cellarmasters), petrol (Caltex Woolworths service stations) and virtually everything else (Big W).
Cash boost: Let’s say you are a family of four that spends about $400 a week on all the above; that’s $1040 more a year you keep.
Refinance your mortgage
If you have been meaning to do this for ages, in a COVID-19-stunted economy, it’s time.
Say you refinance an average $400,000 mortgage (with apologies for making Melbournites and Sydneysiders cry!). Today, comparison website Mozo says you are able to move from an average 4.48 per cent big-four bank interest rate (undiscounted) to just 2.64 per cent from ING – a quality rather than simply cut-priced alternative because it is an authorised deposit-taking institution and therefore offers a real offset account.
Cash boost: $4752 a year.
Slash your house and car insurance
Former head of the Australian Competition and Consumer Commission Allan Fels recently told Money that the “loyalty tax” on building and contents insurance is up to 33 per cent. That implies by simply becoming a new insurance customer, you could pocket one third of your premiums. And the same story may well be true of your car insurance.
Cash boost: Buildings and contents insurance is expensive, which means you could well keep $833 of a previously perhaps $2500 premium (fairly standard for a four-bedroom house).
Just make sure you don’t switch to poor-quality insurance that does not cover floods caused by burst pipes (my insurer covered the entire cost of a $40,000 two-storey repair for me).
Car insurance – perhaps across two of them at $1000 each – could net you savings of another $666.
Take a razor to fixed costs
The main ones are electricity, gas and telcos.
Cash boost: Energywatch reports a typical saving in Sydney of $300, while whistleout cites circa $400 on internet and mobile plans.
Unleash money lying around your home
Social media gives you a platform to sell for a sweet sum of cash any valuable unused "stuff." Think sporting and kids’ equipment, and designer or vintage clothes. For the latter, use insta hashtags like #shopmywardrobe and #resalenotretail.
Cash boost: Every bit is a bonus.
The total savings of all the above should keep you well clear of the $10,000 in super that you were thinking of grabbing.