Over the last couple of weeks, I’ve been asked on numerous occasions by friends, family and colleagues my opinion on whether allowing early access to superannuation is a good idea.
Why are they asking me this? Because not for the first time, there is debate and discussion over whether young Aussies should be able to tap into their retirement savings to raise funds for a house deposit.
The fact that I am already a home owner (I use the term ‘owner’ loosely – technically the bank owns my house and will for some time) is largely irrelevant.
Regardless of the relative unaffordability of housing to most young people in Australia today; regardless of my financial situation; regardless of the fact I can classify myself as a fortunate ‘owner occupier’ – at no point would I think it’s a good idea to use my super to buy a house.
Why? At a very basic level, I understand compound interest. I get the opportunity cost of that money I withdraw today – for a great blog on this, see Geoff Brooks’ article ‘How a $4,500 bathroom renovation has cost me $60,000 in super and counting’.
The Bankwest First Time Buyer Deposit Report 2016, produced by CoreData for Bankwest, suggests the average savings required nationally among first time buyers for a 20% house deposit is $103,600.
Most career builders, still in the early accumulation phase of their super savings, would need to withdraw a sizeable chunk of their super to make a dent in that deposit – and at what cost?
Plenty has been written about the risk that early release of super would lead to higher home prices, essentially exacerbating the very problem this absurd policy is trying to solve. That’s not to mention the fact that self-funded retirees are already the exception rather than the norm, so the last thing we need is more people being forced to rely on the Aged Pension to achieve some semblance of ‘adequacy’ in retirement.
I also know there are benefits to delayed gratification – and for the most part, I try my best to do this. While I believe there are advantages to ‘living for the moment’, I don’t live beyond my means and I always make sure I’ve got savings set aside for the future.
For me it’s not necessarily about having a comfortable retirement. I, like many mid-30s today, find it difficult to envisage a day when I’m no longer working – it’s a distant concept and not one to which I’ve given much thought.
But I do know that I want to have the freedom to continue to live the life I want to live in the future, whatever my aspirations may be. Call it financial freedom or simply flexibility, I want to be in control of the life that I live and for my family to benefit, rather than suffer, from my choices.
I do realise the irony in advocating for flexibility and control, while at the same time arguing that young people should be denied that same flexibility over their super.
But in this case, I strongly feel that early access to super is not the answer to Australia’s housing affordability crisis. And I believe that it’s a very bad idea.