For a lot of Australians, superannuation is growing quietly in the background until one choice makes it very clear. Financial advisers say that one choice made before age 60 can cost some people up to $90,000 or more by the time they retire, and they may not realise the long-term damage until it’s too late.
It’s not bad luck or market crashes that are the problem. It’s all about timing and how super is accessed, taxed, or redirected before the preservation age.
Here’s what experts say is getting people into trouble and why acting too soon can be so expensive.
The Choice That Costs Too Much and Leads to Loss
The biggest financial loss usually happens when you access or change your super before age 60 in ways that cause tax, lost compounding, or penalties.
Some common choices that can lead to big losses are:
- Taking lump sums that are taxed before age 60
- Starting income streams too soon
- Taking out super when you switch jobs
- Taking money out because of money problems
- Badly planned transitions to early retirement
When money leaves the super system, it loses its biggest benefit, which is long-term growth that is tax-free.
How the Loss Can Get to $90,000
People are shocked by the number because the damage doesn’t happen right away; it builds up over time.
This is how it all adds up:
- Withdrawals made early lower the balance.
- Funds that are taken out stop earning interest.
- Many withdrawals made before age 60 are taxed.
- It’s hard to replace amounts that have been taken out later.
- Missed growth adds up over the years.
If you take out $30,000 early in your 40s or 50s, it could turn into a six-figure gap by the time you retire.
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Who Is Most Likely to Be in Danger
Advisers say that some groups are more likely to be affected than others:
- People between the ages of 45 and 59 who are thinking about retiring early
- Workers who are having money problems
- People who change jobs or careers often
- People who have more than one super account
- People who don’t know the rules about preservation age
A lot of people think that super can be “fixed later.” In reality, once growth is lost, it almost never comes back.
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What the Rules Say About Getting to Super
Most people in Australia can’t freely access super until they are at least 60 years old, unless certain conditions are met.
The main points are:
- Taxes are often charged on withdrawals made before age 60.
- The age at which you can preserve depends on when you were born.
- Access to early access is very limited.
- Take care when using transition-to-retirement strategies.
- If you take out money incorrectly, you could be fined.
The Australian Taxation Office makes sure that people follow the rules, and mistakes can cost a lot.
Stories from real Australians
Mark, 52, from Perth, took out super while he was out of work.
“It helped for a short time,” he said. “But later, my adviser showed me what that money would have turned into. That’s when it hit.
Sandra in Melbourne combined and cashed out a small account to “make things easier.”
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She said, “I didn’t think $18,000 was important.” “It turns out it mattered a lot.”
What Professionals Are Saying
Retirement experts always say that you shouldn’t use super as an emergency fund.
A retirement analyst said, “Super is meant for one thing.” “The sooner you take money out, the more you lose later.”
Data shows that Australians who keep their super until they are at least 60 retire with much higher balances, even if their incomes are the same.
What You Should Do Instead
Experts say that before making any decisions about super before 60, you should:
- Getting help with money from a professional
- Knowing your age of preservation
- Not taking out money unless absolutely necessary
- Thinking about other options, such as help with hardship
- Going over your insurance in your super
Small delays can have big benefits.
