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.

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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