The Courier-Mail

A safe house or a su­per bet

What’s the best long-term strat­egy for spare cash — your home or your fu­ture?, asks

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SU­PER ver­sus the mort­gage. It’s a ring-a-ding de­bate that ri­vals prop­erty ver­sus shares when it comes to de­cid­ing where you put spare money.

Ex­perts say the best place for your cash will de­pend on fac­tors such as your lifestyle needs, debt lev­els, age and in­come tax bracket. And it’s worth do­ing the sums to work out what’s best for you.

RateCity com­pared av­er­age mort­gage rates over the past 20 years with su­per funds and found that su­per was gen­er­ally the win­ner in a fi­nan­cial sense be­cause of its con­ces­sional 15 per cent tax rates.

How­ever, pump­ing ex­tra money into su­per is not al­ways at­trac­tive for peo­ple in their 30s and 40s be­cause they can’t get to it un­til re­tire­ment.

“Hav­ing ev­ery­thing in su­per (means it) is locked away,” RateCity su­per­an­nu­a­tion spe­cial­ist Jeremy Willink says.

By con­trast, mort­gage off­set ac­counts and re­draw fa­cil­i­ties can add flex­i­bil­ity to a mort­gage, but have come with the temp­ta­tion to spend your sav­ings else­where.

Willink says moneys­mart.gov.au’s re­tire­ment cal­cu­la­tor is a great tool for pro­ject­ing how much your su­per will grow dur­ing your work­ing life, and shows the ben­e­fits of mak­ing ex­tra con­tri­bu­tions.

When look­ing at your su­per, make sure you’re get­ting value for your money and shop around if needed, Willink says. “Look at the fees and per­for­mance of your su­per fund be­cause that can re­ally make a big dif­fer­ence,” he says.

“Check 10-year re­turns – don’t just look at what hap­pened last year or in the past three years.”

Wise Owl Fi­nan­cial ad­viser Allan Ward agrees that su­per is prob­a­bly a win­ner from a num­bers per­spec­tive, but for some, noth­ing’s nicer than watch­ing the mort­gage shrink.

Ward says many peo­ple aged over 56 can start a tran­si­tion to re­tire­ment strat­egy where they pour ex­tra money into su­per – gain­ing tax ben­e­fits – and with­draw up to 10 per cent of their nest egg tax-free to pay the bills. “Even if they’re 50 they can dump money into su­per in pre-tax dol­lars and in six years’ time start a TTR pen­sion and make a sig­nif­i­cant re­duc­tion off their mort­gage,” he says.

It’s a bit murkier for peo­ple aged un­der 50. “Ninety-five per cent of peo­ple in that age group just want to pay off their mort­gage,” Ward says.

“Think it through and have a plan for once the debt is re­paid. The only catch is that peo­ple get the debt re­duced then go and buy a big­ger home – it starts all over again and the cash into su­per never hap­pens.”

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