‘I have a mortgage and rental income, what should I do with my $70K payout?’

Q: I am 61 years old and have worked in state government for 20 years continuously since having children. In recent years I have been salary sacrificing all of my salary into my superannuation and living off a Commonwealth Super pension and an income stream through Triple S super.

I have a mortgage of $170,000 on the three-bedroom house I live in that costs $633 per fortnight in repayments. I also have a fully-owned unit that I rent out and I deposit the rent of $260 per week minus agent fees on top of my mortgage repayment to get rid of the mortgage quicker. I have no other debt and manage quite well on the pension and income stream.

I will be taking a package worth approximately $70,000 to leave my job but will have other work when I leave. I just need to know how to utilise the $70,000 in the best way. I want to keep some in cash but should I also pay some off the mortgage and put some into my Triple S super?

A: This is an interesting question and like all interesting questions there are a range of possible suggestions I could make. Firstly, I need to point out that to give a definitive answer I would need a lot more information. Also, I am only able to provide you with general information and cannot give you any specific advice.

It would be interesting to know what is the value of the unit and what is the rental return you get after all expenses on the property. Depending on the answer to these questions, it is possible that I might suggest you sell the unit and use the proceeds to repay your mortgage and invest the balance either in your superannuation account or in other investments to provide you with more liquidity and flexibility.

I am usually very uncomfortable with the idea of having a significant mortgage when you are in your 60s, particularly where the interest is non-deductible as the loan is on your own home. Certainly, dealing with this mortgage should be a high priority. If you do not wish to consider selling the unit, you should consider using the $70,000 from your package (less a cash reserve) to reduce  your mortgage in my view.