QUESTION:
I am 53, my wife is 47, we both work full time and our combined income is $205,000. We hold a total of $680,000 in super and I receive a defence pension of $27,000 a year.
We own our home and have mortgages totalling $1.1 million over two investment properties worth $1.8 million, both negatively geared. We also have an interest-only loan of $217,000 over $250,000 in shares, negatively geared.
Our plan is to reduce the debt on one of the investment properties and move into it on retirement, by which time the other property and the share portfolio should be positively geared. Should I use a transition to retirement arrangement to build my super nest egg instead of reducing debt? Or, should I use the transition opportunity to reduce tax but still draw an income to pay down my mortgages?
ANSWER:
On your income, you should be maximising your contributions to super because such contributions lose just 15 per cent, which is much less than your marginal rate. Also, by doing this you maximise your negative gearing deductions. Reassess the situation each year.
