David and Victoria are both 45, and David earns a reasonable salary of $200,000 and is on the highest marginal tax rate, and is looking to retire in 15 years when he turns 60. Meanwhile, Victoria does not work because she looks after their school aged children.
Their home is worth $900,000 and they have a mortgage of $600,000. They were unsure as to whether they should contribute their surplus income (savings) to it to their mortgage or to superannuation.
We considered alternative strategies such as contributing all of the surplus (after tax) income to the mortgage, then after clearing the mortgage direct the surplus income to superannuation as non-concessional contributions. Assuming loan interest of 8% pa and a return of 7.7% for super, we recommended that David maximize his concessional contributions to super and direct the remainder to the mortgage. The result of which would see David and Victoria better off by about $70,000 after 15 years.
Today, David and Victoria continue to enjoy their lifestyle whilst knowing they can look forward to the future with a sense of certainty. We continue to help them build and protect their wealth for future generations.
This is a hypothetical example based on a real client experience. Names and details have been changed.