Is it better to put more money into your super and mortgage or save some money in an account yourself?

Question

I have an account that i save money into but its for holidays and stuff but im thinking long term for my future... If u put extra into your super u cant access it until you retire and they are putting the retire age up and up.

Answer 1

It's great that you are trying to save or invest more money! So even before you ask your question, you are on the right track.

The answer is it depends - on your current levels of saving, your age, and your investment goals.

It appears there's really three elements in your situation:
(1) Paying down your mortgage faster
(2) Investing in a retirement account
(3) Investing in a savings/brokerage (non-retirement) account

If possible, I'd recommend all three. However, very few of us are in such a position. Let's pretend you are in your 20's to 30's, with a stable job and moderate to low levels of debt. In this case, I'd recommend your options in this priority:

(1) Save for retirement
(2) Invest in a Brokerage (non-retirement) account
(3) Pay down your mortgage.

Here's why: If you have a 15 or even 30 year mortgage, your rate is probably around 5-7%. (If it's higher, you should probably look at re-financing). The stock market, over the past several years, is consistently beating that return. You are building your credit score with your mortgage, and the interest you are paying on your loan is tax-deductible. So your mortgage is what you should consider "good debt", and you will not get the most out of your dollar by paying it down.

If you only have the money to invest in either retirement or regular savings, I'd recommend choosing a retirement account, or Individual Retirement Account (IRA). The tax advantages are too great to pass up. Even though you can't touch it until you reach a certain age - depending on the type of IRA - it forces you to maintain a level of discipline in investing for older age - when you may not be able to work at all.

If you can invest in both an IRA and a regular account, that's even better. This will give you both peace of mind that you will have money in retirement, and that you will start building a liquid - meaning you can get to it - nest egg for large purchases in the future.

A financial planner can get you started in the right direction when beginning your IRA. Many discount brokers offer assistance in setting them up with little to no fees. They will be able to assist you as well with non-retirement accounts.

Answer 2

If it is your only means of saving money, I would not put extra money into the mortgage unless you already have a "rainy day" fund set aside. Paying extra into the mortage is a good idea if your goal is to pay off the loan faster. The problem with it is that it is difficult to get access to your money should you need it. You would basically need to borrow it against the property and pay interest. I would diversify savings initiatives.