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How a $4K bathroom renovation has cost me $60K in super

Superannuation  |  6/07/2018  |   7 min read

There's been lots of debate about accessing super early to fund first home purchases. The superannuation industry has generally come out in opposition, pointing out the potential long-term cost to members of drawing on super early.

It's easy to believe that the super industry is running this line out of self-interest, wanting to retain your money in their investment pools as much as possible. It's also easy for a boomer like me, already locked into the housing market and riding the wave, to preach good advice about saving for the future and so on. But the reality is early access can have real and ongoing consequences. I should know, since it happened to me.

I was lucky enough to buy my first home in the heady days of the mid-1980s, when house prices were low and interest rates were sky high. In fact, interest rates got so scary, I came within a whisker of losing that first home in what was then heartland working class Northcote in Melbourne's north.

Not everyone had super in those days. It was little understood by the public, but I worked for Ford Australia which had a superannuation scheme. Over seven years in the scheme, I amassed a retirement benefit of $13,000, which is a reflection of where salaries were in those days.

Dealing with mortgage rates around 18%, and facing financial foreclosure as well as a crumbling bathroom, I decided to cash in my super (all of it), even though the bathroom renovation would only cost about a third of that (I hate to think what happened to the balance, but the parties at the house were good in those days).

So debates about allowing early access to super always lead me to thoughts about the financial pressures and priorities of that time and how it influenced my financial behaviour.

Yesterday, I actually considered what the $13,000 I cashed in has meant to my super benefit today. Assuming a modest after tax and fees return of 5% a year over about 30-plus years, it would translate to nearly $60,000 today (based on ASIC's MoneySmart compound interest calculator). As I haven't yet pulled out the retirement deckchair, that will go higher over the next few years.

Everyone is different, and super remains a relatively low financial priority compared to mortgages, home deposits, and more immediate expenses. But it’s worth looking beyond the horizon.  

I can certainly vouch for the financial compromise created by dipping into your super early. And while it didn't cripple me financially, in the latter stages of my career I'm starting to think an extra $70,000 grand stashed away would be a welcome addition. 

Written by Geoff Brooks, Equip's Head of Marketing and Advocacy. 


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This information is provided for general information only. It does not take into account your personal objectives, financial situation or needs and should therefore not be taken as personal advice. You should consider whether it is appropriate for you before acting on it and, if necessary, you should seek professional financial advice. Issued by Equipsuper Pty Ltd ABN 64 006 964 049 AFSL 246383.  MySuper Authorisation Numbers 33813823017672 and 33813823017518  (‘Equip’, ‘the Fund’ and ‘the Equip Rio Tinto Fund’).

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