Question 1

I am 58 with $800,000 in super and my husband has $400,000. He is 49.  We owe $1 million on our mortgage so it looks like we will be carrying at least a partial mortgage into retirement. I have health issues and I want to retire at 63. 

We’d love your advice on how we can try to pay down our mortgage 50 per cent in the next five years. We are both contractors with an average income of $400,000 pretax between us. We have a lot of overheads in terms of livestock as we also have a farm (non-commercial). 

Many believe financial advice is solely about “investing”.

However, the key to good financial planning comes down to some key areas, including:

• Setting goals
• Prioritising goals
• Budgeting to achieve them

You seem to have considered the first two and have strong incomes. To reduce the loan balance to $500,000 in five years, you need to focus on:

• Interest rates
• Fees
• Repayment amounts and frequency

You’d need to pay approximately $5600 fortnightly, depending on other factors. Online calculators can help fine-tune these numbers.

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Reducing your loan before retirement is a feasible goal, especially with your income, if you prioritise it.

Question 2

I am 70 and my wife 67. We don’t get age pension from Centrelink as our assets exceed the threshold. We get our monthly income from my wife’s allocated pension from super. We don’t have any other income.

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I have $330,ooo in my super account, which I have not converted into an income stream. Am I better off changing into a regular income stream or parking that money into my daughter’s mortgage offset account?

I can draw any amount from that $330,000 in an offset account as and when we need it. It’s more like gifting, but not actually. This indirectly helps my daughter build equity. Also, it will not show as an asset after five years for the Centrelink age pension. Please advise. Thanks

With your super accumulation, as you are over 65, you have the option of doing whatever you like with the funds – withdrawing funds at any time or converting into an income stream.

The advantage of converting it into an income stream is that all earnings and payments are tax-free. But given your age, you need to withdraw a minimum of 5 per cent of the balance each year.

If you don’t need those funds, they could be saved elsewhere.

If you wanted to help your daughter out, you could gift or loan her the money and put it into her offset account. Just be very clear with her whether it is a gift or a loan.

If it is a gift you are correct, after five years Centrelink will no longer count that money as yours.

If it’s a loan and the expectation is for the funds to come back to you, then it’s still treated as an asset and deemed under the income test (even though you don’t get any income from it).

Question 3 

Hi Craig, I am 55 with just over $1 million in super. We owe about $190,000 on our mortgage.

My husband is 65 with no super. I had hoped that if we set up a self-managed super fund (SMSF) we could “pool” our super, allowing my husband to draw down some funds to put towards our mortgage. I would continue to work (my pretax salary is $200,000) and keep contributing to our super until I retire at 65. 

My research seems to indicate this is not possible. Could you let me know if there are any ways we could legally achieve this? Appreciate your column, and with thanks. 

Kathy

Hi Kathy,

Your research is correct. You cannot “pool” super funds.

Where people get confused is that by opening an SMSF, and both being members, the funds are then combined.

However, within the SMSF you have to have your own separate accounts and you can’t move money between different account holders. You can withdraw money from one person and re-contribute to another, but given your age, this is not possible for you.

Given your husband’s age, you also cannot use the spouse contribution splitting strategy.

Apart from directly paying the mortgage down yourself with additional repayments, there are not many other options.

One smaller option you should consider is making “spouse contributions” to your husband’s super each year. If your husband is retired or earning less than $40,000, then by contributing $3000 to his super, you would receive a tax offset of up to $540.

There is no compulsion to keep these funds in super so he could then simply withdraw those funds each year to make additional loan repayments.

Craig Sankey is a licensed financial adviser and head of Technical Services and Advice Enablement at Industry Fund Services.

Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.

Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.