We are retired and considering using our super to pay off our mortgage. Is this a good idea?

Q.

We are a retired couple and are considering converting my husband's super into cash to pay off a mortgage. It was about $1,200,000 in July 2008, but currently sits at approximately $800,000. We have two rental properties on a $800,000 interest only mortgage. The pension fund currently pays $4800 per month. Rental income is approximately $60,000 per year, which currently is about $1200 per month more than the mortgage payments. From April, I will be getting a pension of $32,000 per year on which I have to pay $12,000 tax until I am 60. We own our own house mortgage free. The mortgage runs out in March 2013. I will be 55 in April, my husband is 66. Do you think it is a good idea to use his super to pay off this mortgage? It would mean we have a well defined income, rather than having to depend on the vagaries of super fund performance. The fact is his super could be worth nothing, depending on how long and deep the recession lasts. Property prices will go down too, but not the mortgage. We will need about $100,000 for a year for living. What are your thoughts?

If you super is invested in a well diversified share portfolio it is not going to fall to nothing. An option may be to withdraw sufficient from the super to reduce your loan to a level where the property is neutrally geared. Then there would be no need to subsidise the loss from your capital. This would give your super time to recover.