There are two of us - with a $280k mortgage, and plenty of equity (no other investments).

A. 63yo with let's say $150k super and "retired"(but no pension). It's so low due to being in and out of a very fickle workforce (and recent (successful) cancer surgery), the life insurance component ate it up - thanks AMP...

B. 53yo (me) with great income and massive super (great employer, permanent role) and obviously some ways to go before retirement (and a $70k windfall pending but goodness knows when - never bank on it).

The question is - would it be beneficial in the long term to withdraw some of A's super (tax free) to reduce the home loan?

With B's income there is plenty of scope to either keep paying the higher mortgage payments for an early payout OR pay lower payments and more into super - need to reduce the pressure on A whose age is and issue getting back into this particular workforce (although we could never prove that). Or possibly gives us more disposable income to enjoy precious life a bit more.

As we age there is always the option of downsizing too - would leave us well in profit. So I am comfie that we will be OK in retirement. But is it a savvy financial decision??

Hi Annie,

To answer your first question - should you withdraw to pay off the mortgage? Well, as A is over 60, they can withdrawal the money tax free and put it onto the mortgage - the money then is essentially earning a tax free, risk free rate of return equal to that of the mortgage interest rate. They could also start a pension being over 60 and out of work, and that pension wouldn't pay any tax on earnings. So the question really is - do we want to go the low risk option and earn a rate of return equal to the mortgage, or, do we want to invest that money, take on some investment risk, to try achieve a greater return. There is no right or wrong answer here and will depend on your personal preference, but also your goals and all your other financial resources available to you.

B should really just be salary sacrificing up to the cap, and possibly super splitting those contributions to A. Also, any additional surplus cash flow you have, you have the choice of paying it off the mortgage, or making non concessional contributions to superannuation - the answer to this is in the same vein as the first paragraph. But remember, A has a tax free environment available to them being a pension, where as B only has their superannuation accumulation account where tax is paid at 15%. So other than salary sacrificing to the max, I wouldn't think B would make any additional contributions to their superannuation.

Remember too, that if A isn't earning an income, you can invest in their name and it is also essentially a tax free environment (up to a point).

The answer to all this would probably lie somewhere around a repayment plan of the mortgage by the time B reaches age 60 (or whatever age you feel comfortable with and realistic) - utilise enough cash flow to work towards that goal, then invest any surplus over and above in the lowest tax environment possible.

There are pros and cons to having higher value or lower value principle residence, but it is my opinion that the cheapest principle residence that makes you happy is the best option, and all other available equity can work for you being invested. So downsizing at sometime I think will be a good option for you.

Let me know if I can be of any further assistance.

Cheers

Glenn