Money tips you need as coronavirus crisis continues
Anxiety over our health is being matched by anxiety over our finances as the full force of the coronavirus becomes apparent across Australia.
Australians have seen their super balances fall alongside world markets, a devastating impact on their day-to-day finances as work dries up and growing uncertainty about the long-term impact on their families' fortunes.
David Haynes, head of policy for the Australian Institute of Superannuation Trustees, and Angus Sullivan, Group Executive Retail Banking Services at the Commonwealth Bank, today fielded questions from News Corp readers about how best to manage their finances as the coronavirus pandemic continues.
They urged Australians to speak with their superannuation funds or financial advisors as markets become increasingly volatile, but said history showed there will eventually be a rebound.
Here's what else they had to say:
Q. We are self-funded retires. We have his super investment in conservative and mine in balanced. We are about 5 and 9 years away from aged pension. Should we be taking a different investment approach or have we left it too late?
A. David Haynes: You should not be making any decisions about your investment options without talking to your super fund or a financial adviser. Historically, markets have rebounded and people should think carefully before crystallising losses.
A. Angus Sullivan: I can't offer you personal financial advice. The best suggestion I can give you is to chat to your adviser or super fund and make sure that your investments match your risk profile and time horizon. That will help you make a decision appropriate for your situation.
Q. My youngest son has been living overseas in Austria for years with his Austrian partner, he has a modest amount in superannuation. Can he access it from Austria, as it stands now that is his home?
A. David Haynes: This situation is not specifically addressed in the Government and ATO announcements but is likely to become clear over the next three weeks - this early access to super becomes available in mid-April. I suggest you look at the ATO website in a couple of weeks.
Q. I received an unsolicited phone call from someone offering to help me access my super - how difficult is the process?
A. Angus Sullivan: I'm not an expert on super, but I would be very cautious about responding to an unsolicited call. Contact your super provider and discuss with them.
A. David Haynes: You will not need anyone to help you with making an application when access becomes available in mid-April. You will be able to contact the ATO directly and they will manage the process for you. You should be aware of unscrupulous operators making unsolicited offers to access to your super.
Q. I was made redundant in February and managed to find a new job that started on the March 3. The new deal I did was heavily reliant on commission with a nominal base wage per year a small component ($20k per annum). It's likely that from today if I manage to hold on to my job (a big if as I literally won't be doing anything) I will no longer be able to earn any commission at all for an extended period. What are my options and options for other commission-based employees?
A. Angus Sullivan: Two thoughts for you
1. Perhaps you can approach your employer for support on the terms of your employment given the situation and chat through some options
2. Might be worth a visit to myGov website to see what government support is available following the recent govt announcements.
Q. If you are at retirement age, but still have your Super in an Accumulative fund, is it worth changing the Investment Option to Cash (or perhaps Stable) for the foreseeable future.
A. David Haynes: What we saw during the GFC was that crystallising losses at a low stage in the market (eg, by switching your investment option) locks in losses and risks missing out on an eventual rebound.
Q. If I have super in three different accounts and claim $10k, will they split it among all three?
A. David Haynes: The ATO is administering the payments and the details are still being finalised - access will be from mid-April. It is likely that you will be able to nominate where the payment comes from. In the meantime, I suggest you update your details on your super funds' website,
Q. I'm 30-years-old. If I was to access $10k from my superannuation, how much roughly would that cost me when I retire?
A. David Haynes: It's been estimated that a 30-year-old taking $10,000 out of their retirement savings could lose $50,000 by the time they retire.
Q. I missed much of the stock market fall by moving my super to cash early. Would it make sense now to move it back to a balanced fund to take advantage of an eventual market rebound, or would you suggest waiting longer?
A. David Haynes: I suggest you contact a financial adviser with your question. The markets have been very volatile over the past few weeks, and the Government suggests that the impact of the pandemic will continue to be felt over coming months.
Q. I'm a sole trader who's business has dropped off significantly. I'm a couple years behind in my taxes, will this affect me getting my super, and how will I go about claiming my super?
A. David Haynes: From mid-April you can apply directly to the ATO through myGov, and certify that you're eligible. If you are, they will give you, and your super fund, the ok for a release. The fund will make the payment to you without you needing to apply directly. I suggest you update your fund details online. Accessing you super before retirement should only be considered as a last resort.
Q. I'm interested in obtaining the $10k withdrawal from my super. Is it true that you have to be without a job to qualify? I'm 59. Low wage. Only want it for hardship reasons. Will they be flexible with this?
A. David Haynes: If you receive an eligible government benefit (such as parenting payment) or have had your hours reduced by 20 per cent or more, you may be eligible for early release of super. This become available via the ATO from mid-April.
Q. Though I am still working and getting paid at the moment, my separated wife has lost her job and my older mother who works casual has also lost her job and she wants to live with me for six months or so. Essentially I need to support (rent, food, bills) myself, my mother and help my separated wife and kids.
Can I access my super even though Im working still so that I can pay off small credit card and $4k personal loan and have some cash right now?
A. David Haynes: The ATO website gives the eligibility requirements for the early release of super that becomes available mid-April. However, you should look at the other government income support payments now to see if you are eligible. Unless your hours are reduced by 20 per cent or more and remain in work (let's hope you can), you may not be eligible for this early release of super measure.
Q. My wife and I are self funded retirees. Should we transfer some money from super to a bank account which is not affected by the markets?
A. David Haynes: You should speak to your financial adviser. It depends on your age, balance, other assets and other considerations. While you need money to meet your living expenses, as we saw during the GFC, crystallising losses at a low stage in the market locks in losses and risk missing out on an eventual rebound.
Q. I am just about to turn 50 and have my super balance set to the strategy of growth with a risk rating of 6. Like everyone else, my balance has taken a hit in recent weeks. Should I change my super strategy to conservative growth with a risk rating of 3 (and lock in my recent losses), a Cash strategy with the lowest risk rating of 1 - or wait a bit longer to see if the share market turns around so I can regain some of my losses?
A. David Haynes: While there are no guarantees, history shows us that markets do rebound. As we saw with the Global Financial Crisis and as you note, many of those that switched at a low point in the market missed out on the eventual market recovery.
Q. Will smaller banks and credit unions survive the coronavirus? Are customers large term deposits over $250K safe in your opinion?
A. Angus Sullivan: Not sure which institution your money is with. That said Australia's financial system is very sound, and very well capitalised by global standards. I run CBAs retail bank and I'm completely confident that your money will be safe.
Q. My term allocated pension finishes in three years. It has dropped from $153,000 to $139,000 as of March 22. Should l request a higher allocation of cash?
A. You should contact your super fund or financial Adviser as the answer to this will depend on your personal and financial situation.
Q. I have two years remaining on my income stream should l transfer a greater percentage to cash?
A. David Haynes: Superannuation is a long-term investment and while the current crisis is very worrying, the economic and investment outlook is likely to be very different in two years time. As a general rule, moving to cash will realise losses. I suggest you call you financial Adviser.
Originally published as Money tips you need as coronavirus crisis continues