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Ask Paul: Should I take money out of super and open a term deposit?

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My husband is retired and gets a small pension from Centrelink and an even smaller one from the UK. I work part time (22.5 hours a week) and also get a small pension from Centrelink but nothing from the UK as I didn't qualify.

We used my husband's superannuation to build our smaller house to downsize. I have $292,000 in super after putting in the balance from the sale of the bigger house. This is also after my super went down considerably during Covid-19.

Would I be better off putting it into a term deposit and earning a small bit of interest; or leaving it in super with the risk of it plummeting again but earning more interest? I'm 66 and my husband is 70. Thanks. - Kathy

ask paul clitheroe should i put spare cash into super or term deposit

Right now it is hard to be certain about anything, Kathy. I've done plenty of reading over the past 40 years about pandemics and their impact on people and markets, but living through one is quite a different thing. Whatever you do should pass the "sleep at night" test.

Frankly, I have no idea what returns your super fund will deliver in the next year or two. But providing it is a large, well-diversified, low-cost fund, I really feel that in the long term it will deliver you better returns than a term deposit.

Yes, in the short to medium term we may well see some dramatic ups and downs with our super. Clearly a term deposit will give you very low returns, but your capital is about as safe as it can be. However, your life expectancy is some 20 years and possibly much longer, so my opinion is to leave it where it is and take a long-term view.

Doing this, you should be able to sleep at night if we have another decent market downturn. Here I need you to think about your own attitude to risk. We will eventually get past this pandemic and, based on centuries of history, the assets your super fund holds should deliver you good returns.

I am uncomfortable about taking your money out of super. Don't forget, another plan is to look at the investment option you hold in super - you could choose to switch to a lower-risk option.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Ask Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. View our disclaimer.
Comments
Matt Heffernan
October 7, 2020 8.35pm

Wow, Not very helpful non advice.

If the person you are speaking about is real. How about this as an option. Go into your super account online and allocate a percentage of your super into a term deposit.

I recently did this with my own super. I'm 38. Considering the economy I'm 70% in cash.

There is no reason to have a high exposure to risk at the moment. Especially at 60/70.

These people should be mostly in cash now. If the market turns and things look bullish or just likely to hyperinflation then you can move from cash back to stocks more risk. But at the moment leave yourself exposed to risk??

You don't need to be in the market all the time. In 1 year you can get back in. At the moment I'm on the sidelines . Locked in the gains. Waiting for blood in the streets. If it doesn't come I'll just rejoin the uptrend.

Kerri Moore
October 8, 2020 9.41am

I'm 70 and need to be in shares for a decent income. The market goes up and down. But in most cases the dividends stay around the same still get my 5 to 6 percent. Atm. Not chasing high increases only after dividends

David MULLINS
April 19, 2021 12.27am

Hi Paul. I'm 54 and have $100,000 in savings, not including Super. I keep hearing about this thing called Bitcoin.

Is it a fraud? And what other options do I have for growth?

A financial adviser told me he wouldn't touch such a small amount.

random dude
September 29, 2021 12.00am

hey david , as a crypto guy myself and an owner of bitcoin, by the way you have phrased your question, you will need to do some learning and research before purchasing bitcoin. over time it has outperformed every other asset on earth, but in the short term its extremely volatile and you need to be able to sleep at night. You also need to understand the security risks (so you dont get scammed and lose it all) and tax implications. If you really want to buy, I always recommend people to buy $100 on an exchange and leave it there for 3 months checking it once a week, then sell it and transfer it back to cash, this will give you a good introduction to the processes, fees, net profits (if any) etc.

I would suggest speaking to your accountant/advisor/super fund about adding more to your super and adjusting your investment profile to suit your timeline and plans. Most people allocate no more than 5-10% to a high risk investment such as crypto(bitcoin), gains can be large as can the losses, you need to ask yourself what risk am I comfortable with, its different for everyone. BR

Salvatore Sortino
April 5, 2022 9.38am

Hello and thank you for given the change to write to you. I've got my money in super. last year gave me great returns, but this year its another story. the sharemarkests has been going from strength to strength as is at moment shares are i a position that never been before, very high, still loosing money just about every week. what could be the reason for this?

Money magazine
Verified
April 6, 2022 8.22am

Hi Salvatore,

Thanks for your comment.

Unfortunately, Paul cannot respond to comments, but we will pass your question along to him for his consideration for a future issue of Money magazine.

- Money team