Super vs The Bank in unsettled times
14 September 2020
When investment markets take a dive, just like what we're all experiencing now with COVID-19, you might feel it's time to move your money out of super and stick it in the bank. After all it's a safe haven, right?
Well you might like to rethink that strategy. There are some persuasive reasons why leaving your money in the superannuation system makes real sense.
Firstly, you can only move your money legally out of super if your super is in an Income account (not Super account, unless you meet a condition of release), or you are able to withdraw it for compassionate reasons.
Secondly, at BUSSQ, we want to make sure your money is working as hard as it can to provide you with the income and lifestyle in retirement you've worked hard for all your life.
We're here for you!
A BUSSQ Retirement Income account lets you access your super as a flexible income stream, while the rest of your money remains invested. A definite advantage is the tax free payments you receive if you are age 60 or over and you can draw a lump sum at any time which could be used to repay debt. You can set up a BUSSQ Retirement Income account if you have $25,000 or more to invest.
It's for this reason we are providing you with eight compelling reasons why super will almost always be a better investment choice over a bank account.
- Your super and income accounts are a tax vehicle, meaning they are taxed effectively when money goes in and out. Also, the underlying assets where your money is invested determines the return you get, or the volatility you endure.
- If you take your money out of the super system to put in the bank when investment markets dip, it may not be possible to add it back later when investment markets rally, particularly if you are age 67 or more.
- If you are under age 67 and you take your money out of the super system, there are strict limits on how much you can put back in.
- If you want to invest more conservatively when investment markets dip, then your BUSSQ Retirement Income account gives you several options to do just that. You can mix and match the investment options, as much as you like, to suit your needs.
- However, if you do decide to switch to, say to the Cash option due to the volatility of a more growth oriented option, you also have to make that second decision on when to get back into the 'growth' market and not miss out on rallying markets.
- Remember, when you switch, you crystallise or realise any drop in value once it's locked in, when up until that point it is only a paper drop in value.
- Due to the COVID-19 pandemic, the government has halved the minimum drawdown for the 2020/21 financial years, which means you could reduce your payments in 2020/21 in order to preserve your Retirement Income Account from being eaten into further – works well if you have cash reserves to live off to ride out a market downturn.
- A vast number of BUSSQ members have a "bucket" strategy when it comes to the payment of their income stream. This means most of their super is invested in growth assets and some in the Cash option which is where their income stream payments come from. This means you are not touching the growth option even if it is volatile, and the Cash option is meeting your short term income needs.
If any of these points resonate with you, and you would like to know more about how you can structure your BUSSQ Income account with more insight, then talk to one of Skylight Financial Solutions' financial planners. Skylight Financial Solutions was built by BUSSQ because we care about you and your family's financial future. To make an appointment with a financial planner call 1800 SKYLIGHT – 1800 759 544 or go to www.skylight.com.au
This information is general advice only and does not take into account or consider your personal objectives, financial situation or needs. Before acting, you should review the relevant Product Disclosure Statement to ensure you have all the information about the relevant BUSSQ product and how it works and consider the appropriateness of the information to your needs or seek independent advice from a properly qualified professional. Past performance is no guarantee of future performance. Prepared by BUSS (Queensland) Pty Ltd (ABN 15 065 081 281, AFSL 237860) as Trustee for BUSSQ (BUSSQ Fund, ABN 85 571 332 201). BUSSQ owns Skylight Financial Solutions Pty Ltd (ABN 46 076 835 848, AFSL 450139), the company that provides financial advice to our members.