HECS: Should You Pay It Off Early?
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- Опубликовано: 15 окт 2024
- Dr Sam Wylie discusses whether Australians should pay off their HECS debt right away.
#finance #investing #australian #HECS #Saving #finance #personalinvestment #studentdebt #superannuation #borrowing #taxes
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I paid my hecs off early. My undergrad I paid the last year of 10% voluntary payment discount, my masters the month before indexation applied when I knew I'd be paying off my balance anyway that financial year via mandatory repayments, and finally my wifes masters during covid when indexation was about to be 7-8% which was higher than our mortage % offset.
Sounds like you are on top of your finances and investing. Indexation rates were 7.1% and 4.7% or the last two years, but the Govt is proposing to retrospectively reduce those rates to 3.2% and 4% respectively. In case super returns were a lot higher than inflation in both years. Cheers, Sam
@drsamwyliefinanceeducation9181 Thank you. I'm hoping so... salary sacrifice to super is a great option. We've been doing 15% including employer contributions. Investing out of super after that I believe is also good, firstly into extra payments into paying off mortage early (effective mortage rate is a risk free return rate and equivalent franked to your top personal tax margin), I know paying down debt isn't investing but effectively can be a better return than investing. Once mortgage debt paid off, then good to invest outside of super and possibly max out super contribution up 15% taxed rate.
@@karldc83 It is good to think about where you want to be on the risk spectrum. People who are naturally to the right of the risk spectrum (should be taking more risk) because they: Have secure income / are relatively young / don't have exceptional obligations / are not especially risk averse, often find that if they concentrate solely on paying down their mortgage end up a long way to the left of where they should be on the risk spectrum. Maxing out concessional super contributions definitely helps to prevent that.
Outside of Super, shares/ efts etc get CGT clobbered.
Capital gains are what you want. CGT is half of income tax.
@@drsamwyliefinanceeducation9181 agree if you hold it long enough.
HECS debt is taken into account for mortgage capacity. How does that affect the flow chart and choices?
Investing in an low cost ETF that receives an 10% annual return is a better option. Super has too many fees.
ETFs are good, but super has very low tax.
Great explanation.
Thanks Sandeep.
I paid off my mortgage recently, the most obvious benefit for me is the psychological effect - I have a total sense of freedom without a mortgage.
Where are you putting your savings now?
@@drsamwyliefinanceeducation9181 emergency fund, then pre tax super contributions, then EFTs