Opinion
Should I invest my savings in shares or super?
Noel Whittaker
Money columnistI’m almost 67 years old and wondering whether I should put $50,000 into super or buy shares. I’ve never bought shares before, but I have about $450,000 in super. I owe $200,000 on my home, which is worth around $2.4 million. I plan to keep working for two more years – three days a week, earning about $120,000 a year. Thank you for your consideration.
If you buy the shares in your own name, you’ll face capital gains tax if you decide to sell them later. A better strategy would be to make tax-deductible contributions to your super and select an Australian shares investment option within the fund.
The longer your money stays in super, the more it can grow.Credit: Simon Letch
This gives you the same exposure to shares, but the money goes in pre-tax, boosting your super balance more efficiently. And once you start a pension, your investments will earn income in a tax-free environment.
Keep in mind, the longer your money stays in super, the more it can grow. So once you stop working, consider withdrawing just enough from your super to cover the interest on your home loan, rather than paying it off in a lump sum.
My question is about whether it can be beneficial to use the redraw facility on my mortgage to increase my super balance, rather than paying off my mortgage ahead of retirement. I am 56 years old, working full-time earning $138,000 a year with a super balance of $400,000.
I have a mortgage of $99,000 at 5.89 per cent with a redraw of $98,000 available. I have been making monthly repayments four times more than the minimum amount. My property is worth around $850,000.
Would it be worth redrawing $75,000 from my mortgage to top-up my super balance, then reduce my ongoing mortgage payments to the minimum amount and put extra earnings towards voluntary super contributions? My intention would be to clear any remaining mortgage debt once I can access my super.
Provided your superannuation fund is earning more than the interest you’re paying on your mortgage, I don’t see a downside – especially at your age, when access to super isn’t a major issue. Just keep in mind that interest on money borrowed to invest in super isn’t tax-deductible against your salary.
I assume your employer is contributing around $17,000 a year to your super. That means you still have about $13,000 of room left under the $30,000 annual concessional contributions cap. I’d focus on making tax-deductible contributions first, as these come from pre-tax dollars.
Can you please advise how the proposed change to the government’s superannuation policy will affect people with more than $3 million in super? And how should we deal with it?
The government is proposing to impose an extra 15 per cent tax on a proportion of earnings that relate to the portion of a superannuation fund that exceeds $3 million per member. Importantly, this has not yet been legislated and is unlikely to be passed before 1 July – the date it’s supposed to take effect.
Whether the legislation will be backdated if passed after that date is unclear. There’s no one-size-fits-all strategy, so it’s essential to seek expert advice from your accountant.
The critical date to watch is 30 June 2026: if your super balance per member is under $3 million then, the extra tax will not apply for the following financial year.
I’m in my late 50s and have invested in shares through my father’s early help when I was 16. I have done the same for my now adult children. My kids have invested in Exchange-Traded Funds (ETFs) however I struggle with the concept. I know what they are, and the management fee is clear. How can we find more transparency on the ins and outs of ETFs?
An ETF is a managed fund traded on an exchange like the ASX. You don’t buy the underlying assets directly, rather, you buy units in the ETF, while the provider owns and manages the investments.
ETFs offer strong liquidity. Units can be created or redeemed to meet demand, keeping prices close to Net Asset Value (NAV). This contrasts with company shares or Listed Investment Trusts (LITs), where prices fluctuate with supply and demand.
The crucial point? An ETF’s performance depends on its asset class. Some track volatile assets like Bitcoin (e.g. Global X 21Shares Bitcoin ETF), while others follow stable bonds or broad indices (e.g. iShares Core Composite Bond ETF or Vanguard Australian Shares Index ETF).
Liquidity matters – but the asset class drives your risk and return. A quick web search usually gives you the yield. For example, I invest in STW, an ETF that tracks the ASX 200 index. Its current yield is 3.59 per cent.
Noel Whittaker is the author of Retirement Made Simple and other books on personal finance. Questions to: noel@noelwhittaker.com.au
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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