Over the past two decades in Australia we have experienced the federal government’s policy shift for citizens to become more self-sufficient in their retirement. The move by the government is intended to reduce the pressure on social security system given that we are faced with an ageing population issue.
The effects of this move have not only impacted retirees with the ever-changing Centrelink rules, it also impacts younger working families dealing with the increased cost of living. A common question from clients is how much should they invest in their retirement savings and how much should they attempt to pay off their mortgage?
Things that you need to consider
There are a few things to consider when weighing up the cost/benefit of contributing to super over paying down the mortgage.
The first consideration is to determine how much income is left over after all essential expenses have been met. Secondly, the pros and cons of either contributing to super or paying more off the mortgage need to be understood.
Some of these may include:
- prevailing interest rates
- taxation benefits of contributing to super
- growth of the superannuation investments versus benefit of shortening the loan term,
- and the fact that superannuation cannot be accessed until a condition of release is met.
Talk to a financial adviser today
The above are just some of the considerations that need to be thought of prior to deciding to either contribute funds to super or reduce the mortgage.
If you are unsure about what to do, book an appointment with our advisers at Stonehouse Group to discuss your circumstances with one of our advisers today.