{"id":338,"date":"2019-10-07T12:23:54","date_gmt":"2019-10-07T02:23:54","guid":{"rendered":"https:\/\/bantacsfinancialsolutions.com.au\/Nblog\/?p=338"},"modified":"2019-10-07T12:23:55","modified_gmt":"2019-10-07T02:23:55","slug":"getting-your-home-paid-off-before-retirement","status":"publish","type":"post","link":"https:\/\/bantacsfinancialsolutions.com.au\/Nblog\/getting-your-home-paid-off-before-retirement\/","title":{"rendered":"Getting Your Home Paid Off Before Retirement"},"content":{"rendered":"
\n\n\n

Recent figures from the Australian Bureau of Statistics (ABS) state that only 56% of people aged 55\u201364 are mortgage-free, and there are fears that more and more Australians will find their retirement plans seriously challenged as they try to survive on a reduced income, with mortgage payments to boot.<\/p>\n\n\n\n

The problem can be solved by taking action sooner rather than later. The starting point is figuring out where you are now.<\/p>\n\n\n\n

Think about Mal, aged 55, who earns $120,000 a year and has a mortgage of $200,000. Mal hasn\u2019t been all that interested in finance, so his home loan\u2019s interest rate is still 5% and the repayments are drifting along at $1300 a month. He hasn\u2019t given any thought to what would happen when that day finally comes along.<\/p>\n\n\n\n

His first step should be to go to my website (www.noelwhittaker.com.au<\/a>) and start using the loan calculators. Mal would quickly find out that his loan has 20 years to go, and that he will arrive at age 65 with a debt of $127,535 remaining. Luckily he does have a guardian angel \u2014 superannuation.<\/p>\n\n\n\n

The trick is to take advantage of the different tax rates between money received in the pay packet, and money salary-sacrificed to super. Mal loses 39% of gross pay taken in hand, but just 15% on contributions to super. Furthermore, money paid off the mortgage is effectively earning 5%, while most good superannuation funds are returning around 8% per annum.<\/p>\n\n\n\n

Mal\u2019s employer contribution should be $11,400 a year, which leaves room for an additional $14,600 to be contributed to superannuation in one way or another. This can be done either by salary sacrifice, or by making additional personal superannuation contributions.<\/p>\n\n\n\n

Let\u2019s suppose Mal makes personal superannuation contributions of $1217 a month ($14,600 a year), which should boost his superannuation by $12,410 a year after the 15% contributions tax is taken off. The payments will be tax-deductible, which should lead to a tax refund of $5700 a year which he could contribute it to superannuation as non-concessional contributions.<\/p>\n\n\n\n

In 10 years, when Mal is 65 and ready to retire, the non-concessional contributions should have boosted his superannuation by $87,000, and the deductible concessional contributions by $189,000.<\/p>\n\n\n\n

Instead of facing a debt of around $127,000 when he retires, which could take a big chunk of his employer superannuation, he has boosted his personal superannuation by $276,000. He could then withdraw $127,000 tax-free to pay off the debt, and still have an extra $149,000 in super, in addition to the employer superannuation.<\/p>\n\n\n\n

There is a lesson here for anybody facing retirement within the next 20 years. The actions you take today will make a huge difference to the kind of retirement you are likely to enjoy. The longer you leave it to start \u2014 the harder it will be.<\/p>\n\n\n<\/div>","protected":false},"excerpt":{"rendered":"

Recent figures from the Australian Bureau of Statistics (ABS) state that only 56% of people aged 55\u201364 are mortgage-free, and there are fears that more and more Australians will find their retirement plans seriously challenged as they try to survive on a reduced income, with mortgage payments to boot. The problem can be solved by …<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[17,18,20,21],"tags":[],"class_list":{"0":"post-338","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-borrowing","7":"category-retirement","8":"category-superannuation","9":"category-your-home","10":"anons"},"yoast_head":"\nGetting Your Home Paid Off Before Retirement - Noel Whittaker's Blog<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/bantacsfinancialsolutions.com.au\/Nblog\/getting-your-home-paid-off-before-retirement\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Getting Your Home Paid Off Before Retirement - Noel Whittaker's Blog\" \/>\n<meta property=\"og:description\" content=\"Recent figures from the Australian Bureau of Statistics (ABS) state that only 56% of people aged 55\u201364 are mortgage-free, and there are fears that more and more Australians will find their retirement plans seriously challenged as they try to survive on a reduced income, with mortgage payments to boot. 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