Leave your super alone

QMy husband and I are nearly 50 and were recently stood down from our jobs. We have income from two rental properties ($3200 a month) and have $200,000 in savings. My super is about $100,000 and my husband’s is about $50,000. Should we withdraw $20,000 each from super from the early release scheme this time around? And then should we buy another house for rental income?

I am very sorry to hear that you and your husband have been stood down, Quyen. I hope that this situation resolves itself as the economy starts to recover. That it will recover is, in my opinion, quite certain. But the timing is very uncertain. Based on all the uncertainty around us, I feel economic growth will take longer than we all hope.

What does cheer me up, though, is that you don’t have to take money out of super to survive. If so, that would be fair enough, but you are looking to use the money to buy another property, so the debate we need to have is property versus super.

Here I am going to argue firmly that you should leave your money in super. This is for a few reasons. First, I suspect that as well as your two rental properties you own a home, so you have most of your wealth tied up in property. Second, super gives you exposure to a great mix of assets, all over the planet. Finally, just look at super returns over the decades. A typical balanced fund has returned over 8%pa. And these returns are generated in a very low-tax environment

It is your money, so your choice. But I feel that super spreads your risk away from property. Property may well outperform super or super may outperform property. That, however, is not the point. I have no problem with quality property in a growth location as a long-term investment, but diversification is a key investment concept and I really would prefer you to spread your risk.