Ask Paul: Do I have too much in super?


Dear Paul,

I am a 37-year-old husband, father and high school economics teacher. My wife is a part-time physiotherapist and we (mostly her) are raising a beautiful boy who is almost six.

We are wondering if our savings/investment priorities are appropriate given our circumstances as a youngish family navigating uncertain times. 

ask paul clitheroe do i have too much in super

In short, am I putting too much money in my superannuation? I have $225,000 in super and my wife has about $95,000. We have a small trust for our boy where we buy $1000 in shares for his birthday each year and it's worth about $6000 depending on the day. We also have about $13,000 in cash in the bank.

Our only debt is in two mortgages - a rental property owing about $175,000 and our residence owing about $650,000.

Conservative real estate analysis would say they are worth maybe $250,000 and $850,000 respectively. We have no intention of ever leaving our family home.  

I have been contributing an additional 15% to super for a long time. I love the tax incentive, stability, security, compounding and overall philosophy.

But when I look up "how much should you have at age ...", I seem to be about 10 years ahead. 

Does this mean it's reasonable to scale back the extra contributions and perhaps build cash savings? Obviously, we're preparing for interest rate hikes, so the lack of an emergency fund is a worry - though my job is stable and we have the investment property to sell if we needed to.

Do you have any advice regarding striking the balance between security and liquidity, and whether it's best to prepare for more short-term conditions rather than worry about retirement so much. - Justin

After about 40 years of answering money questions, Justin and Jenny, yours is a first for me. I have spent a fair bit of time suggesting people get more into super.

Super really is a super investment. Sure, you can't touch it until you get to a retirement age, or suffer some form of hardship, illness or a permanent move overseas, but as a wealth creator it is a ripper.

Let's look at this. First up is the really significant tax break. You summarise this very well, as I would expect from an economics teacher. You "love the tax incentive, stability, security, compounding and the overall philosophy of it".

Your training and experience serve you well here. Most people understand the general idea of compounding returns, but few ever really analyse the numbers for their own situation.

The fact that you can contribute to super through salary sacrifice, to the limit of $27,500 a year, is one thing. But, as you know, this adds greatly to compound returns. I would guess your tax rate, plus Medicare levy, on the top part of your income is about 34%.

You have a choice with your voluntary contributions. We'll look at just one dollar you earn. Take it home as after-tax pay and you will have around 66 cents. But top up your super and you will have 85 cents invested. Even if you don't spend the 66 cents you have in your take-home pay, which most of us do, you only have that amount to invest.

As you know, in super, from each dollar you put in, you have 85 cents invested. If you take money home after tax and invest that, you will pay your own marginal rate of tax on earnings. But in super you pay maximum tax of 15% on income earnings and 10% on capital growth. My view is you are getting huge value out of compound returns, as you have more to invest and so more invested.

ask paul clitheroe justin
Justin with his wife, Jenny, and son, Thomas. Photo: Supplied.

Large, low-cost super funds have generated great long-term returns for many decades. They also give you instant diversification, as they invest globally in high-quality assets.

In fact, super sounds like my old maxim, "if it looks too good to be true, it will be". Super is no scam, though. As a government-regulated product, with tax concessions, it is just a great long-term wealth creator.

Next, do you have too much super? After a fair bit of thought, my answer is a firm "no". It is of no surprise to me you have more super than most people your age. This is because you understand money, tax and compound returns. As a result, you have committed a decent part of your savings to super.

What gives "balance" to your super is you have your home, with good equity in it. You have planned for the current increase in interest rates and you have an investment property. Your investment property will pretty much pay for itself, with tax deductions on any losses after rent comes in and then costs are accounted for.

You correctly refer to emergency money. This is an important concept, which, again, too few people plan for. I would regard your current $13,000 in cash as a good buffer.

Along with the equity in your properties and a secure job, I would argue this is sufficient. I am certain you would have death and income protection cover in your super fund, but this is one thing I would like you to check and ensure it is adequate.

Given your situation, with both of you working, your ability to save and to top up super, I don't think your super amount is excessive. The only downside I can see is the inability to access that money before retirement.

If interest rates rose to unexpected levels, you could, of course, pause voluntary super contributions and apply that to your mortgage.

It is also terrific you are investing for your son's future. What I would ask here is that you remember that the key to kids and financial success is discussing money, in an age-appropriate fashion, at the dinner table or at other appropriate times. That is where kids really learn long-term habits.

Finally, please, when it is appropriate and you can fit it into your classroom teaching, find ways that fit the economics curriculum to use examples that make money come alive for your students. I strongly recall my teachers making dry things like compound interest be far more relevant to me, by applying economics to everything from gambling to credit cards.

I'd like to finish by saying that you and Jenny are great models of financial literacy. Just keep doing what you are doing. You've got the "get rich slow" path absolutely nailed. Good on you both and I wish you all the best for your future.

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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.
Money magazine
January 11, 2023 11.37am


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Sujoy Das Gupta
January 11, 2023 6.01pm

Justin and Jenny could also consider early retirement/or aim for it - if their Super ends up being in a greater shape in the lead up to retirement age!

Jared Willow
January 11, 2023 6.58pm

Hi Paul, Great response and well done to this young family for setting the bar. If Justin has a residence owing $650,000, and he does not plan on moving, would you suggest he pays down his non-tax deductible debt? Paying down the debt will give more options (to borrow using the house equity for an investment property/shares, etc making it tax deductible debt)?

Val Helen
January 13, 2023 12.45pm

Such a beautiful family with well grounded financial ideals!... I do wonder why there has been no focus on the $650k home loan where the average repayments are more than $2500/month which is quite substantial given the modest teacher income/ part time employment? The family have also expressed concern with rising interest rates/cost of living so shouldn't paying off this debt be their priority - just for peace of mind? Even $13000 may not be enough with the aforementioned as well as the unforeseen emergencies that may arise...

Justin SFP
January 26, 2023 12.41am

There is also the option of the Spouse Super split, taking advantage of the 15% tax break and building your partners super balance.

Luke Goodier
February 9, 2023 5.36am

Is superannuation a con?

Superannuation is mostly a con. It involves the funnelling of vast amounts of wealth from wage-earners to the financial sector, and continues the neoliberal project of fracturing and individualising our hopes and ambitions. The primary beneficiaries of our super system are fund managers and other financial parasites

Mike Richards
February 27, 2023 5.30pm

Wish people would stop "flexing" usually goes like this -

"Dear Paul,

I'm 22 years old and just finished university, graduating with a First Class degree in Journalism. I've been hired as the CEO of the famous multinational company "MotzaBank" and will be on a starting annual salary of $38m plus 25,000% bonus if I do OK.

I did work a part time job during university and managed to completely pay off the 16 investment properties I bought as a teenager, but I worry because I've only got $1m in super, $250m in shares and a mortgage of $25 left. Am I doing OK or should I save more ?"

(rather than the more realistic "Your Super" article I read in the Weekend AFR where the author had lost ALL their funds of $58,000 in a SMSF that dealt in crypto).