The Courier-Mail

YOUNG INVESTORS LOOK TO SLICE MORE OFF LOAN DEBT

- NOEL WHITTAKER Noel Whittaker is the author of Making Money Made Simple and other books. His advice is general and readers should seek their own advice before making decisions. Email: noelwhit@gmail.com

MY WIFE and I are 28, with a total income of $250,000 and a $345,000 mortgage on our home. We are looking to buy an investment property. Do you think we should maximise repayments on our residentia­l mortgage or make the maximum $30,000 concession­al contributi­on to super? I am less enthusiast­ic about the super option as I suspect the

preservati­on age could be around 75 when we retire.

My preference is to maximise the payments on your non-deductible home loan and, if investment property is your thing, take out a fully deductible interest-only loan for investment. I agree there are risks in making large voluntary contributi­ons to super at your age. I AM 24 years old and earn $103,000 after tax. I have $290,000 left on my $350,000 home loan on a $650,000 property (first home). My dad acted as the guarantor and supplied $300,000 for me to buy my first home. I make $1700 monthly repayments to my dad and $2200 to my bank. I have no other debts. When do you know it is the right time to buy an investment property? Are there any golden rules to follow when taking out additional investment loans?

There is an old saying, “There is never a better time to make a good investment”, so I think your focus should be on finding an undervalue­d property in a growth area. Keep in mind that the land content is far more important than the state of the building. The golden rule in taking out an investment loan is to keep that loan strictly separate from your housing loan. This is because the interest on the investment loan is tax-deductible but the interest on your home is not. I AM a married self-funded retiree receiving no Centrelink benefit except for the Commonweal­th Seniors Healthcare Card. I am thinking of withdrawin­g all of my super and putting it in term deposits to avoid the uncertaint­y of the super system, having suffered considerab­le losses in the GFC. Is there a limit to how much I can withdraw as a lump sum in any financial year? Do you see any pitfalls in doing this apart from maybe paying a little tax? I am trying to avoid the 17 per cent tax, which you have mentioned, if

my superannua­tion goes to a non-dependant when I die.

There is no limit to the amount of superannua­tion you can withdraw tax-free once you reach 60 and, while I agree it’s prudent to avoid the death tax by exiting the superannua­tion system before you die, you don’t want to do it before you need to. You have given no indication of your age but keep in mind that cash is not expected to produce the same long-term returns as a diversifie­d portfolio. Therefore the potential cost of being out of the market may be higher than any tax you may pay by leaving the super system.

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