Top up super to the max
QWeare debating our next move and I hope you could help with some clarity. My wife (41) and I (48) earn around $200,000 between us. We have our home, which is valued at $900,000 with a $639,000 interest-only loan (set up as an interest-only investment property if we need to move) with $250,000 in an offset account. We have two young kids in primary school.
We also have:
An investment property in Melbourne valued at $700,000 with an interest-only loan of $454,000, renting for $465pw, now turned cash positive after five years.
A joint self-managed superannuation fund with $440,000 in shares, and combined $130,000 cash and $100,000 in industry super (for life insurance) and an overseas fund.
$30,000 under my wife’s name as an emergency fund in an online easy access account.
$500,000 in shares in my name, and my wife has $125,000 in shares in her name, with dividends of around $30,000pa.
What is my next move? Do I continue to save into my offset account, pay down the home loan, buy more shares in my wife’s name or invest through the SMSF. Or is there anything I am missing? I would like to retire by 60 if possible. Hi Trevor, good job on building assets. Let’s do a quick summary. You have equity of $510,000, including the offset account, in your home; about $250,000 in the investment property; $670,000 in super; $625,000 in shares; and $30,000 in cash, so a net wealth of $2.085 million. You plan to work for about another 12 years, taking you to 60.
The key to stopping work is a fully owned home but you also need investment assets such as super. With about a decade to go, first up I’d be topping up my super fund to the maximum deductible amount of $25,000 each. Of course, it all depends on your budget but if you have surplus income beyond this it would be great to pay more into your home loan. Clearly you are good savers and I suspect both of these things are possible.
Over the next decade or so if you clear your mortgage and add between you some $750,000 to super, this along with the compound returns on your super balance will put you in a great position. Pretty obviously, how much you want to spend when you stop work is a fundamental question.
If you want to take a look at your projected position when you wish to stop work, go to a planning tool, such as the one you will find on the MoneySmart website. I do like this site. It is run by our regulator ASIC, meaning it is not some sort of sales tool. So give it a try – I think you will find it a valuable use of your time.