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Insights

06/07/2020

Paying Off Mortgage at the Cost of Planning For Retirement

Many people are entering retirement with a mortgage. They may need to discharge super savings to make mortgage payments. This is not the option for everyone.

The problems are: withdrawing from super may hinder your mobility in retirement. Likewise, going into retirement with debt happens and isn’t often ideal.

Downsizing, selling the home or finding additional income are other ways of balancing the debt book as you approach retirement. The Age Pension is one form of income available to most Australians as they enter retirement. This can supplement income from a superannuation savings account in the payment of debts. However, it must be taken into account that there are expenses other than mortgage payments to consider during retirement, property tax for example.

Some government initiatives exist too to help seniors find casual employment of up to a few days per week. This has been shown to have positive impacts on the health of people who would otherwise be retired. It’s worth asking your employer or your local council if they can provide any help here to increase your retirement age.

Savings that have been withdrawn from super can be invested outside of super. Earnings from investments can form retirement income that can be used to pay off a mortgage early. You might need help when considering investment options for superannuation savings.

Investment in other housing opportunities, stock and small business are options available to retirees looking to grow their super savings. It pays to contact the professionals like Pillar Financial if you’re considering this option. Investments can grow over the course of retirement, leaving budgets intact with capital growth accruing for the long term. Debts can be paid off as in pre retirement years and the mortgage paid in full eventually.

Pillar Financial is helping many clients, couples, pay off two to three hundred thousand debt on a mortgage. This is being done using capital growth leveraged from investment properties. Without proper tuition in navigating investment, they enlisted the help of Pillar Financial and are aiming to wipe off their mortgage within ten years.

When downsizing is a good option, retirement homes are often comfortable and affordable living arrangements that can make retirement financially stress free. One option is to liquidate the house, use the surplus to pay off remaining debt and then live comfortably in a retirement village with the extra money and super in pocket.

While this option can be initially time consuming, the peace of mind that follows is manifold.

Preparing for retirement involves balancing the debt book and understanding the loan terms of your mortgage. Consolidate your debts, look to making extra repayments on your mortgage, take advantage of one off payments, particularly around tax time.

See if it’s possible to switch to a home loan with a lower interest rate too. Online mortgage brokers can be useful here or contact Pillar to put you in touch with one of our preferred partners. This could positively impact your savings for retirement as you finally pay off your loan.

Getting ahead in retirement means budgeting and remaining mobile with your financial plan. It’s about leveraging your equity in a way that reduces fees, interest and reliance on savings. Estate planning can be a complex process. However, with the right help you’ll accumulate more retirement savings, pay off your mortgage faster and have more to enjoy in your golden years.

Contact the strategy team at Pillar Financial today for a confidential discussion about managing your retirement planning. We’re happy to take your call five days a week during business hours.