Super should do better over time
Kathy is considering a term deposit for $292k, but …
QMy husband is retired and gets a small pension from Centrelink and an even smaller one from the UK. I work part time (22.5 hours a week) and also get a small pension from Centrelink but nothing from the UK as I didn’t qualify.
We used my husband’s superannuation to build our smaller house to downsize. I have $292,000 in super after putting in the balance from the sale of the bigger house. This is also after my super went down considerably during Covid-19.
Would I be better off putting it into a term deposit and earning a small bit of interest; or leaving it in super with the risk of it plummeting again but earning more interest? I’m 66 and my husband is 70. Thanks.
Right now it is hard to be certain about anything, Kathy. I’ve done plenty of reading over the past 40 years about pandemics and their impact on people and markets, but living through one is quite a different thing. Whatever you do should pass the “sleep at night” test.
Frankly, I have no idea what returns your super fund will deliver in the next year or two. But providing it is a large, well-diversified, low-cost fund, I really feel that in the long term it will deliver you better returns than a term deposit.
Yes, in the short to medium term we may well see some dramatic ups and downs with our super. Clearly a term deposit will give you very low returns, but your capital is about as safe as it can be. However, your life expectancy is some 20 years and possibly much longer, so my opinion is to leave it where it is and take a long-term view.
Doing this, you should be able to sleep at night if we have another decent market downturn. Here I need you to think about your own attitude to risk. We will eventually get past this pandemic and, based on centuries of history, the assets your super fund holds should deliver you good returns. I am uncomfortable about taking your money out of super. Don’t forget, another plan is to look at the investment option you hold in super – you could choose to switch to a lower-risk option.