Dad Panicked and Withdrew All Super When Covid Hit, Now What?

Jase83 on 17/12/2020 - 09:19
Last edited 17/12/2020 - 13:12

So my Dad (age 65) panicked after seeing his super drop about 20% in March when the first Covid crash happened. Without telling anyone he withdrew it all (~100k) and put it in a term deposit earning basically nothing. Only told me a few months later.

Not looking for specific financial advice, but in general what are his options for a very safe place to park the money and start to withdraw some over the coming years. Can he put it back into super now? The best savings rate I've seen is UBank just over 1%, barely seems worth it.

It's kind of a touchy subject, I don't want to come across as lecturing or judging, just try and help steer him in the right direction.

Edit: Couple of other bits that may be relevant

  • Owns a basic house (400k) with partner (think they still have a small mortgage) + maybe 75k in total assets, I doubt any cash savings other than this ex Super money.
  • Not working anymore (partner works part time), has some health issues. Was getting jobseeker during Covid but looks like that might run out as they push him to apply for and be prepared to work in jobs which are completely unrealistic.
  • Will be eligible for age pension at 66 as DOB is between (1 January 1954 to 30 June 1955) https://www.servicesaustralia.gov.au/individuals/services/ce…
  • It was just a regular super fund, maybe Australian Super. No defined benefits, etc.
  • Term deposit is about to finish so he is free to move it

Thanks!

Financial Superannuation

Comments

    • freakatronic on 20/12/2020 - 20:40

      The crisis is not allowed to happen. The house says the market goes up, and the house always wins.

      More money printed in 2020 than in the twenty preceding years. It's all gonna go somewhere.

  • freakatronic on 20/12/2020 - 20:39

    Bitcoin.

  • SeVeN11 on 21/12/2020 - 02:52

    Not sure why people are complicating the simple situation.

    1) He has 100k cash from from super (he most probably did the right thing because he should haven't that much allocation in stock, he should have been more defensive before 65 anyways. ie. Cash
    2) He has small mortgage
    3) House is worth 400k
    4) Is over 65 and most probably eligible for age pension since all he has accumulated in 65 years is his house and still have debt on it.
    5) have 75k in asset, but this doesn't sound like cash or investable asset, i.e car, furniture stuff.

    Earning 1% in a term deposit is 2 to 3 times worse than offsetting or paying off mortgage of 2-3%

    I don't think you need to pay someone a few thousand dollars to tell you to

    1) pay off the mortgage
    2) keep an emergency fund of 1 years expense and put it in cash/term deposit (most probably 35-40k - pension for couple is about this much)
    3) apply for age pension
    4) kick back and enjoy the rest of your life.

    Somewhere in between he'll most probably need to do a budget to make sure he can live on the pension. (Which is decent living given your mortgage is paid off… what old couple can't live on 35-40k (almost tax free) a year? When their mortgage is paid off)

    I don't know why pensioners complain about the pension not being enough.

    • Duckie2hh on 21/12/2020 - 09:07
      +1

      Its only $24,554 for singles per year. Even with no Mortgage, that is a very tight budget.

    • plasmog on 21/12/2020 - 09:35

      I agree, the pension is far more than I spend in a year, and the majority of expenses are due to work. e.g. at the office so I buy lunch / coffee instead of making it.

      With all the time in the world as a pensioner, it should be trivial to reduce costs.

      In my experience my relos who complain about the pension are running 50% of it through the pokies, have top of the range telstra plans (including landlines!!!) and buy a new car every 5 years.

    • avoidfullprice on 21/12/2020 - 14:32

      I don't know why pensioners complain about the pension not being enough.

      I speculate those old couple able to live on 35k-40k would be illness free who are able to cook and care for themselves in their own home with no ongoing medicals or care support. Those pension money would be enough to cover housing and utilities expenses. They are old so won't eat much therefore groceries cost are low. Transport cost low as they get pensioner concession, and clearly don't need to own or maintain a car. They are old so don't need to social that often they don't even need more than 20k, right? And of course we are all going to be like them. Population aging problem solved!

      I disagree, and everyones circumstances is different. Good budget regardless. Hope it helps OP greatly.

    • blueyez on 13/01/2021 - 10:17

      Super funds average 5% return if not more depending on length of time - so it is a good environment to build up wealth versus not much from the banks. Being 65 means they could also access their super whenever they want tax free.

      • DrRalph on 13/01/2021 - 10:32

        If your Super fund is only averaging 5% you should immediately change your fund.

        • blueyez on 13/01/2021 - 10:35

          Was just a general comment… too many variables with super and last FY the performance was much lower than the averages over time.

      • whooah1979 on 13/01/2021 - 14:43

        People that were satisfied with 5%, 10% or 27.4% gains on their investments in 2020 had low expectations.

  • Candour on 21/12/2020 - 14:03

    best go back into a good industry super fund. i use hostplus which has got good manager options and choice + which lets you select shares or etfs if you can learn about investing. - put them in fixed interest online if he wants safety while the world receission plays out, then move into say a conservative option. can DIY but you must be prepared to get financially literate. investment and trading are complex issues. get the pdf from host+ or even aust super - the better industry funds have investment opportunities beyond their fixed options.
    you must be prepared to do the work for him. talk to the fis officer at centrelink as well as those options affect your pension.

  • Terbo on 04/01/2021 - 13:30

    Money = Feelings people ! Thats why Dad grabbed his money, and why he wont discuss it but is probably still not sleeping at night (fear, shame). Older, blue collar, not a saver, not financially literate, scared that they will lose what little they have, dont know where they will end up. So many comments applying their own lens to another's position, but without considering that person's view and feelings. Getting 1% VS 5% avg return, or saving 4% on a loan, or holding via Super or personally are all valid issues, but if you cant give the person some basic understanding of their current/future position and reassurance that they can be ok, both now and when they are 85, then it doesnt matter what ETF, Super fund, etc you use. After 13 yrs C'link/FIS and 15 yrs Fin adviser I can tell you that how people feel about money is just as important (if not more) than getting the 'best' return. Even when I have told people they are ok, strategies are in place and they dont really need us ongoing, they still want the relationship, just so they have someone to call and discuss issues or concerns. This is just as much for those with $100K as those with $2m. So many people just dont get money and/or maths, and are willing to pay for advice, just as I pay a mechanic, plumber or electrician. Those that perpetuate the 'fin advisers are just for investments and big dollars' myth are doing so for a reason, or from a position of ignorance.

  • skido on 04/01/2021 - 14:36

    I'm a total newb and < 20yo so can someone please explain how withdrawing your super early affects anything? does super gain interest over time? Isn't it just similar to a seperate bank account where your retirement funds are set aside?

    • sangohan on 05/01/2021 - 15:48
      +1

      super is an investment (usually shares and/or properties) that the gov't has setup rules for (such as restricting withdrawal until a certain age, and restricting the amount you're allowed to put in), and in exchange, you get great tax treatment (only 15% tax on entry, vs your normal marginal rate), and almost tax free withdrawal when you retire.

      it gains over time, but not via interest like a bank account. It gains from the increase in value of the assets being purchased with your super.

      • skido on 05/01/2021 - 15:59

        ohh got it, thanks

  • blueyez on 13/01/2021 - 10:08

    Ok looks like the rules have changed regarding the work test, so he might be able to! Would also recommend that he look into whether or not an Income Stream (pension account within super) might be worthwhile if he wants to be paid a certain amount each year. He'd need to speak with a financial advisor.

    More super contribution options for people aged 65-66

    The government will change contribution rules for older Australians to offer them more flexibility in saving for retirement.
    From 1 July 2020 Australians aged 65 and 66 will be able to make both before and after-tax voluntary superannuation contributions, without meeting the ‘Work Test.’ This means the Work Test will align with the eligibility age for the Age Pension, which is scheduled to reach 67 from 1 July 2023.
    The Work Test currently requires people aged 65-74 who want to make voluntary contributions to their super to work a minimum 40 hours in any 30 consecutive day period in the financial year the contributions are made.
    The change also means people aged 65 and 66 will also be able to bring forward up to three years of non-concessional contributions (up to $300,000) without needing to meet the Work Test. An individual still can’t go over the current $1.6 million total super balance.

  • Jimothy Wongingtons on 09/10/2021 - 11:48

    Is there an update on this? My dad still has his money in bank convinced it’s safest… anyone with advice would be appreciated.
    In b4 Bitcoin.

    • rektrading on 09/10/2021 - 11:52
      +1

      Keep it there. The boat has already left and won't be turning back.

      • Jimothy Wongingtons on 09/10/2021 - 12:00

        Don’t even consider putting it into super again? He plans to work for 3 years or more (already 69)

    • dentani on 09/10/2021 - 19:41

      Well, if he had put his money in shares at the beginning of the year he would've increased it by 10%.

      • Jimothy Wongingtons on 09/10/2021 - 19:48

        Yep so what’s the best conservative choice now?

        • Bafranz on 09/10/2021 - 19:49

          Consider property if you don't think it's all coming down like a house of cards.. who knows, you might inherit it one day

    • Jase83 on 18/01/2022 - 16:05

      Sadly he passed away in Jan 2021 from a sudden heart attack - undiagnosed issue. Months away from the pension kicking in and being in official 'retirement' :(

      • BigBirdy on 18/01/2022 - 16:09

        My condolence, sorry he passed away still young'ish

        • Jase83 on 18/01/2022 - 16:25

          Yeh it was such a shock - fit guy, did bike riding/gym most days.

          With an overweight/unhealthy person a GP probably would have had them monitored for heart conditions more closely. But being fit it just went completely undiagnosed.

      • cashless on 18/01/2022 - 16:15

        That's crap news, sorry to hear it OP.
        Good luck to you going forward

      • Jimothy Wongingtons on 18/01/2022 - 16:29

        I’m sorry to hear that mate. Sincere condolences.

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