Ask Paul: Why can't I use my super to pay off the mortgage?

Dear Paul,

I am 57 soon and, after many years spent raising a large family, have recently started casual work.

I have a matured investment plan sitting in an account, but because it is superannuation I am not allowed to access it until I am 60.

My husband has good superannuation so we are planning to focus on growing it for retirement. We still owe $150,000 on our mortgage. 

Can I access my matured super funds now to put towards reducing my mortgage? Why do I have to wait until I'm 60? Won't it save me money? - Ruth

Yours is an interesting question, Ruth. This, I think, is good news. As your birth date is after July 1, 1964, age 60 is when you can access your super.

The reason it is good news is that this puts you in the 'young' category. Oldies like me, at 68, can access super when we like. The disadvantage is I am a fair bit older than you.

Seriously, though, there is a bigger question here. I suspect your mortgage is around 6%.

If we look at the long-term returns of balanced-type super options, which most of us are in with our super, the returns have been closer to an average of 9%pa.

I do appreciate that super fund returns depend on market performance and some years they will go backwards and other years do really well, but over time they have been higher than the interest rate on a mortgage.

I have no idea what will happen to markets over the next few years, but we do have a good history of market returns. The Australian sharemarket, for example, has averaged total returns, including dividends, of some 11% over the past 120 years.

When you turn 60, you will get to make a choice to reduce your mortgage, but even then I would be looking at my mortgage interest rate and comparing it to my superannuation returns. 
Interest rates may well have dropped by then, but for me it is just a numbers game.

If history tells me my money does better in super than paying off a mortgage, I know what I would be doing: seeking the best return on my money.

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