Should You Pay Off Your Mortgage or Add More to Your Super?

So, you’re thinking of contributing more to your super. That’s excellent! You’ll certainly be on the right track to growing your savings for the future. 

That said, you, like many other Aussies, might have to make a difficult decision between contributing more money to your super or paying off your mortgage so you can pay it off faster. 

How Do You Decide? 

Read on as Paul Garner from Novo Wealth, your trusted financial adviser in Adelaide, provides you with information that may be able to help you decide:

Why You Should Consider Paying Off Your Mortgage as Soon as Possible

Let’s face it—a mortgage is a costly debt, especially if you have around a $400,000 loan (median mortgage in Adelaide), at a standard interest rate. 

It can be beneficial to pay off your mortgage as early as possible if you are in the financial position to do so.

If you can free yourself from your mortgage repayments, you have more of an opportunity to increase your wealth. It can also enable you to allocate a larger portion of your income to your investments. 

Why You Should Consider Prioritising Making Additional Super Contributions

Superannuation is a unique retirement savings vehicle that can be tax-effective and can deliver high returns in the long term for your retirement. Your super fund invests your money on your behalf and allows you to choose from various pre-mixed investment options from high growth to conservative and some funds allow you to make those investments ethical-based.

The Australian Prudential Regulation Authority (APRA) latest September 2021 report showed 

People who had the highest superannuation balances tended to be the fund’s top personal contributors. 

When it comes to super, it pays to be a long-term investor. Putting a larger portion of your income into super can help you build a sizable nest egg for your retirement.

To learn more about how you can make personal contributions to your super check out our Guide to Understanding Your Superannuation Contributions. 

What Are the Tax Benefits Of Contributing to Your Super?

Concessional contributions are contributions made from your pre-tax income to your super. 

This type of contribution is taxed at 15%, which is typically lower than your marginal tax rate. This generally allows you to pay less tax while simultaneously boosting your retirement savings.

Before making extra concessional contributions, it may be beneficial to speak with a financial adviser who can help you make informed financial decisions based on your personal circumstance – especially if you want to make sure your super fund is as ethical as possible.

How can you pick a superannuation fund that corresponds with your values and does the best things for our financial future as well? Read more about ethical super funds. 

Compounding Interest

Over time, the interest in your investment compounds. That means the interest is added to the capital of the investment. As a result, the amount of money you have grows faster than the interest you earn.

Compounded interest can have a massive impact on your retirement savings long term!

This is why making contributions to your superannuation fund as early as possible can be enormously beneficial for your long-term finances.

How to Make a Decision between Paying Off Your Mortgage First or Contributing to Your Super

To make a decision, the first thing you need to do is work out how much you can afford to contribute to super while you can still pay off your minimum mortgage repayments. This is because you need to be sure that you can still meet your other financial obligations after you’ve paid your super contributions.

If you can’t afford to contribute more to your super, then it may beneficial to just stick with paying off your mortgage.

On the other hand, if you can afford to contribute more to your super without affecting your current lifestyle, then the next thing you need to consider is your personal situation.

The right decisions for you will depend on your financial situation, your values, and what you are comfortable with. 

Secure Your Financial Future with an Ethical Financial Adviser!

If you are making a decision between prioritising your mortgage payments or making additional super contributions, then it’s important to ensure you have the knowledge to make the right decision without the need to sacrifice your current lifestyle. Of course, this is not an easy decision to make and needs a lot of consideration. 

Seeking financial advice can help you make an informed financial decision tailored to your lifestyle and financial needs. 

Novo Wealth can provide you with the expertise of an ethical-based financial adviser in Adelaide

Contact us today to find out more about the services we offer! 

IMPORTANT; This information is general in nature only. It does not take into account your individual circumstances. We recommend that you seek professional advice before making any investment decision.