Ask Paul: Should we pay off mortgage with super?


Dear Paul,

My husband is 68 and would like to retire soon. Should we pay off our mortgage (under $300,000) with his super?

We have no other income streams, around $370,000 in super, around $25,000 in savings and no other assets.

ask paul clitheroe should we cash out our superannuation to pay off our home loan?

We would eventually sell and downsize. I'm still working part-time and earn around $350 a week, but I'm only 57, so I can't retire yet. - Suzi

Interesting question, Suzi. I can only provide you with a broad look at the key factual issues around your decision.

For expert, personal advice, I would want you to see a professional financial adviser. A chat to your super fund may help - it is likely to offer member advice or be able to refer you to a reputable adviser.

The facts here, though, are both simple and complex.

The simple bits are that if you take $300,000 out of super to pay down your mortgage, you are depriving yourself of a tax-effective pool of money to fund your retirement once you downsize.

You would also reduce your access to cash to the remaining $70,000 in super and $25,000 in savings.

This is the more complex bit. Will super earn more than the interest you pay on your mortgage?

Over the decades, a good, low-cost, balanced-type super fund has been earning members, on average, more than 8% a year. Your mortgage is costing you, perhaps, around 6%?

To take all this information and make it personal to you, start with a chat to your super fund.

But if I was in your shoes and planning to downsize, thereby getting rid of my mortgage, the last thing I would be touching, except for an annual income stream to live on, would be my super.

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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.
Steven Macaulay
December 21, 2023 4.03am

I'm surprised Paul didn't factor in pension eligibility rules

The full aged care pension is worth circa 900k to 1m if expressed as a comparable annuity

Not very high quality financial advise here