Retire Before Preservation Age: Mind the Gap – Late Starter FIRE

preservation age

Thanks to Late Starter Fire for this week’s wealth building strategy: retire early before preservation age.

Each week, I have asked a finance blogger or podcaster to share their personal wealth building strategies. I am hoping these will be useful to compare lots of different strategies and perspectives to provide ideas and insight in your own investing journey.

A few very smart and forward thinking 20 something year olds start saving and investing for the long-term.

The majority of us had higher priorities at the time. It can be demoralising, finally getting round to retirement planning in our 40’s to realise we’ve missed out on so much compound interest.

But all is not lost, Late Starter Fire points out, if a 20 year old can save invest to reach financial independence in 10-15 year old, a 40, 50 or 60 year old can too. In fact, they are at least likely to have some sort of head start – Mandatory superannuation, a (partly) paid off home, or a better income.

Thanks for inspiring all the late starters, there’s still plenty of time if you get going now.

Name/ Online identity:



“9 to 5” profession: Health professional

Side Hustles:

Latestarterfire blog (trying to monetise)

What are your investing goals?

I want to retire at 55 which is a mere 6 years away.  I am investing to build my ‘bridge the gap’ fund to support me for 5 years before I can access my superannuation at preservation age, 60.

What is your investing time frame?  How far along are you?

I discovered FIRE at 47, so later than most FIREes. Luckily for me, at that stage I was already debt free in that I had paid off my mortgage. I started investing in my 20s – mainly participated in IPOs in the 90s and salary sacrificed into superannuation. BUT stupidly, I stopped when I bought my house, ostensibly so I can focus every cent on paying off the mortgage.

I started investing again in 2018.

I am further along than I realised, mainly thanks to investing in super in my early working years.

What the most powerful wealth building tool available to you?

My full time job is my main income stream. I’m trying to increase my income streams in 2021 by monetising my blog and doing surveys. I am very wary of being burnt out as I’d experienced it once already and have no desire to experience it again. And so guard my free time.

What wealth building habits are you utilising to reach your goals?

Spending less than I earn is my number one money habit to build wealth.

And I love automating savings – I make sure an amount is automatically deducted from my weekly wages into various sinking funds first.

Then once my investment account reaches $5000, I invest in ETFs or LICs outside my super

What is your strategy to achieve this?

I’ve worked on reducing my expenses to increase the gap between my income and expenses, in order to invest this gap.

I focused on reducing expenses first because it can be done immediately. I am a spender so being aware of what I spend my money on through tracking my spending has been eye opening for me. Knowing why I spend is also important.

How long have you been using this strategy?

Since 2018, when I discovered FIRE principles and read about savings rate, how to live frugally etc

Were there other strategies before?  If so, what made you pivot?

I salary sacrificed to make sure I contributed the maximum $25000 (including employer contributions) into super for the last 2 years but will now reduce that amount as I really need the extra amount to ramp up my investment in my shares portfolio outside of super – to build my ‘bridge the gap’ fund.

What makes your strategy suit your personal situation?

I can access super ‘soon’ – my preservation age is in another 11 years. I calculated that even without extra contributions ie just relying on my employer’s contribution from now on and (this is a BIG ‘and’) if the fund grows at a rate of 7.2% every year, my balance should double in 10 years. I would reach my target when I need to access it at 60.

To see all the wealth building strategies shared with Aussie doc freedom, check out the Ultimate Step by Step guide to Wealth building, with wealth building strategies.

Aussie Doc Freedom is not a financial adviser and does need offer any advise.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

Pearler Review – The Original

*This post may contain affiliate links. This mean if you purchase through the link I will receive a commission at no cost to you. It is the way sites like this are funded, but does introduce a conflict of interest.  

This is the original Pearler review. I have since become a Pearler affiliate. I have left this article intact as there is obviously more of a conflict of interest now (as for the other Pearler reviews online). But there have been more features added to the platform.

This Pearler review is based on my personal experience with Pearler, but I may be unconsciously biased.

The founder, Kurt Walkom, reached out to myself and other Australian financial bloggers to write the Aussie FIRE book. I received compensation for writing a chapter of the book.

I confess I was happy with Commsec at the time. My commsec account had been a hassle to set up. Despite Self-wealth’s significantly cheaper brokerage, given I don’t trade often, the hassle of switching didn’t seem worthwhile (lazy, I know).

Edit 4/3/21 – I didn’t realise this initially but have received brokerage credits from readers clicking through this article. Anyone who signs up using my link* will receive a brokerage credit, and I will too. 2022 Due to recent AHPRA changes, it is clear this is not allowed.

Edit 08/4/21 – I have been offered and signed up for an affiliate relationship with Pearler. This means that if you sign up using my Pearler link, I will receive a small financial compensation at no cost for you. This is how blogs like this make the time commitment worthwhile. This is obviously a potential incentive for me to recommend Pearler. For full disclosure, I make to this post beyond this date I will have in green font.

Pearler Review: What Interested Me About Pearler

When I heard about Pearler’s auto-invest feature, however, I was curious. Automating investing is the most effective way to ensure you follow your financial plan. Neither Commsec nor Self wealth offer auto-investing. I do already have investments with Commsec and planned to stick with a single platform to keep things simple.

There is a good chance, however, without auto-investing, I may find other things to spend my cash on. Every planned investment will require conscious effort. Each time, I need to ignore the media screaming (as they do) about the impending market annihilation. I will also have to practice delayed gratification and choose to invest rather than buy a new sofa.

In contrast, it occasionally occurs to me I haven’t noticed the direct debit for my spouse super contribution. I check to make sure it is still active, and it just quietly leaving my account unnoticed. To be fair, it is only $115/fortnight, but it’s enough to maximise the spouse super contribution.

Other Auto-Investing Platforms

When I started auto-investing larger amounts (not so long ago) with RAIZ (then Acorns), the $1000 leaving my account was too large to forget. But my investments grew at a surprising rate (Dec 2017-Feb 2021). I withdrew those for an investment property deposit, but now with two investment properties (almost) purchased, I’m ready to invest in the stock market long term.

The micro-investment platforms, such as RAIZ and Commsec pocket allow automated investing, and are a good way to start investing with only small amounts. They do, however, have a limited range of investments.

RAIZ have a selection of preformed portfolios, that you select from based on risk tolerance. Once investing significant amounts of money, fees on these platforms become more expensive than paying brokerage (particularly over the long term).

Commsec Pocket have seven ETFs to choose from. Regardless of the platform, be aware you always pay the underlying ETF management fee (often 0.2-0.6%).

These platforms are ideal for beginners investing small amounts. A limited choice is actually an advantage when the investment options seem overwhelming. But as investors learn more, and become more comfortable, most will look for more control over their investments.

Read my overview of stockbrokers here.

Pearler Review: Why are they Different?

Pearler is offering a low-cost auto-investing platform. You can buy any investment on the ASX (and in the near future US investments). Global ETFs are available on the ASX, so you don’t necessarily need to have access to an International broker to buy international assets.

They are also offering a range of brokerage free ETFs, which seems a similar deal to Commsec Pocket, but with a larger range of ETFs to choose from. I will discuss them in further detail below.

Set Up Hassle

The platform remains an invite-only community, but This link to Pearler will get a free brokerage credit.

The platform is changing and growing fast. Many minor issues have already been ironed out, but the team are still optimising the platform.

Things seem to be working pretty smoothly now. They are still open to feedback but the testing mode is finished.

The actual sign up process was quick and easy, I was able to complete it all online in less than an hour. I can’t remember the exact dramas with Commsec, but they weren’t experienced with Pearler. It all seemed intuitive.

Once you’re signed up, you are encouraged to create a profile. Pearler offers the ability to share your profile with friends, but the privacy level is up to you – adjust your profile between “Public”, “Within Pearler”, “Unlisted” and “Private”. See this article to explain more.

Designing Your Portfolio

You can view profiles of individuals who have been chosen to be public. I can see Aussie Firebug and Dave from Strong Money Australia’s asset allocation. I’m not sure if this is an advantage. You have no idea of the profile’s personal circumstances, and how they may differ from yours.

The profile sharing feature is not designed so that you can copy someone else’s asset allocation. The idea is to allow comparison and perhaps encourage discussion and investigation.

Rather than looking at individual investments, you can also go to the “Shares” tab and find selections of ETFs, LICS and shares based on popularity on the dashboard. Maybe a good place to start if you’re looking to narrow down the selection.

Once you have chosen the assets you want to invest in, set your target allocation. This is the ideal proportions you would like your investments to contain.

If you are stuck designing your asset allocation, spend a weekend working through the excellent content at Passive Investing Australia. It’s important not to get stuck trying to achieve perfection. Stop procrastinating. Set a limit on your learning time, make a simple asset allocation and set it up. You can always adjust as you learn more.

Purchasing Your Investment

You can buy shares / ETFs as with a normal broker with Pearler, but the whole appeal of the platform is the ability to automate. If you want to make a one-off purchase, simply go to the “Shares” tab, search for your investment abbreviation (ticker) and press buy.

Pearler Review: Fees and Investing Frequency

You can now set your auto-invest feature up to invest regularly any number of weeks or months.

In an ideal world, many of us would direct debit a small amount each payday into our investment account. A small amount this regularly ($1K/month) is easier to budget for than a larger lump sum less regularly ($3K/3months).

Paying brokerage monthly (or fortnightly!) is not cost-effective, unless you’re investing large amounts.

Pearler has a handy Investing Frequency calculator to work out the optimal frequency of investing for you. Mine is ~ 7 weekly.

Pearler Review: Auto-Investing Options

When you click on “auto-invest”, you will be offered this choice.

Invest Immediately

For those that are happy lump summing a decent amount at a time, and are happy with their ability to manage cash flow well, investing immediately is the ideal option.

When your money is transferred into Pearler, it is cleared into a Macquarie Bank Client Trust Account. This is not in your own name but held in trust on your behalf.

The money is held here until the investment is purchased when the shares/ETFs/LICs you have ordered are registered to you via the CHESS system. This is the most secure way to own shares, because if your broker goes bust, you can move shares to another broker using your share registration.

The money takes two days to clear before it will be invested. Pearler is not designed for rapid trading, but that suits most long-term investors fine.

If you have set up the auto-invest feature, your cash will be automatically invested according to your portfolio preferences.

There will be cash left over if the share price doesn’t multiply neatly into your investable cash. This waits in your cash account until the next time you’re due to invest.

Invest Once Your Cash Account Reaches Your Threshold for Investing.

This option is all about fees, and your ability to manage your cash flow. If you are worried about a large amount of cash being direct debited every 3 months, Pearler offers this option.

You can direct debit cash into the Macquarie Bank Client Trust Account to wait until you have amassed enough to hit your investing threshold. As described above, this account isn’t actually in your name and currently pays 0% interest (Pearler are trying to improve this).

I would not be keen to have several thousand dollars sitting in an account (not in my name) earning 0% interest.

If you are keen to direct debit your savings out every pay to enable you to manage the budget better, I’d suggest setting up a separate Offset account or high-interest online savings account.

You can debit your investment money to your new savings/offset account every pay before it’s transferred to Pearler at the optimum frequency.

Brokerage and Brokerage Free ETFs

Pearler charges $9.50 per transaction up to $17,500 which is excellent value. Brokerage is now $9.50 for an unlimited amount, even better if you have a lump sum you wish to invest. The more you are investing each time you pay brokerage, the better deal you are getting. But the more time your money sits outside the market before investing, the longer you are missing out on market returns.

Pearler is offering brokerage free ETFs with three providers. These providers have agreed to pay the brokerage fees to Pearler on your behalf, as long as you remain invested for at least a year. You will have to pay brokerage on the eventual sale of assets.

Not all ETFs are offered brokerage free on Pearler, but perhaps more will be over time. The brokerage free ETFs I looked at had slightly higher management expense ratios (MER), around 0.4%.

The graph below shows investment returns paying brokerage and MER of 0.2% vs no brokerage and MER of 0.4%. In this scenario, the investor is $1000 ETF every month. The brokerage free option is advantageous in this situation.

In the next scenario, the investor purchases $3000 four times a year to save brokerage. Paying brokerage is advantageous after a few years in this situation.

Whether the brokerage free ETFs are right for you probably depends on how much you are investing, how often, for how long, and whether the ETFs available suit your needs.

Pearler Review: Auto-Invest Strategies

You have three ways to instruct Pearler to invest automatically. The first “Lowest share” means your next investment will go to the asset furthest below its target allocation. “Rebalance” means potentially splitting your investment to achieve the closest possible target allocation. “Equal invest” means spreading your investment between the assets in your target portfolio. The first is the most cost-efficient and popular.

Pearler’s rebalance option means you can capture the advantages of rebalancing – lower volatility and risk, without the extra cost. For those without a significant Super balance, this could be all the rebalancing needed for several years.

Pearler Integration with Sharesight

Pearler is integrated with share sight. I haven’t got around to setting this up yet, but tracks your investment and summarises all the information (even from multiple brokers) for an easy tax return.

This is particularly useful for those who wish to keep another broker for fast purchases when the market drops, or because it was so painful opening your Commsec account you can’t face closing it.

Although, if you want to keep it really simple, you can move your shares from one broker to another to keep them all on one platform.

Tax preparation this year has was easy with the share sight integration. I just signed into Pearler, then share sight and printed off the reports for my accountant. These reports were available far more promptly than my previous experience with micro-investment apps RAIZ and Stockspot.

Pearler Review: Is Investing with Pearler Safe?

I am fairly cautious around all things finance. Signing up and investing with a brand new broker seemed risky.

Aussie Fire bug, Dave at Strong Money Australia (see his interview with Pearler founder Kurt), Captain FI and Serina Bird at The Joyful Frugalista have all started investing with Pearler.

On noting investments brought through Pearler were CHESS sponsored, I felt more confident. CHESS Sponsorship means you are officially registered as the owner of the shares. If the brokerage platform collapses, your shares can be moved to another brokerage via the share registry (eg Computershare).

I received confirmation of my investment and HIN (holder identification number) by snail mail from ASX a few days later.

It took 2 days from cash being direct debited out of my account for it to clear in my Macquarie cash account on the platform and was invested later that same day. I am not sure how long it took, as it took me a couple of weeks to find my Computershare login and get round to checking the investments were registered – but there they are, right next to the ones purchased from Commsec.

Customer Support

Phone contact, email and online chat directly from the website (the easiest way to get a response). This has been fabulous so far.

I provided feedback and received a response within an hour. Initially, the auto-invest had limited flexibility, I let them know I would like to invest 7 weekly (random!) and they quickly reassured me they were already working on it.

Within days, the auto-invest function had changed to a completely customisable number of weeks or months. Impressive!

Pearler is still early in its journey, but growing rapidly. It’s building a customer base and trust by focussing on what investors want and need. The broker has just hit $2 million invested. If you’re looking for a broker for automated investing, Pearler may be the right fit.

Updates from August 2021.

23/08/2021 Pearler are now offering access to the US stock market for just $6.50 AUD brokerage! You can invest through international ETFs through the ASX, but if you want to buy individual shares in apple, google etc this is now possible through Pearler.

Pearler have created a mobile app. I personally don’t need any encouragement to check my holdings too often, but a mobile app will appeal to many. I will produce an updated review once I’ve had chance to check it properly.

Vanguard have much improved their personal investor offering also. If you plan to only invest in Vanguard ETFs, it’s definitely worth looking at Personal investor again (Brokerage free and no management fee!). For any other non-Vanguard purchases they are still charging an annual management fee (boo!) of 0.1% along with $9 brokerage. I’ll have to follow up with a Pearler vs Vanguard Personal investor article.

*15.07.21 Article updated – Pearler links redirected to Homepage rather than sign up page.

Aussie Doc Freedom is not a financial adviser and does need offer any advise.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any financial decisions.

What is a Mortgage Offset Account: 5 Factors to Consider

Trying to select the right mortgage can be confusing and frustrating. By the end of this article you will have a good understanding of what is a mortgage offset account, it’s advantages and disadvantages.

There are thousands of products available, all with different features, fee structures and interest rates.

What is a Mortgage Offset?

An offset is an account linked to a mortgage that instead of paying interest, reduces the amount of interest you pay on borrowed money.

If you have a $500,000 mortgage and $25,000 in the offset account, you will only pay interest on $475,000.

At today’s incredibly low rates, that equates to $675 per year saved in interest (assuming just 2.5% interest rate).

1. You will Save Interest

Inflation is the increase in costs of goods and services over time, and the Australian government aims to keep inflation at 2-3% per year. If your savings do not earn at least enough to compensate for inflation, they are losing real value over time.

It is essential that any money kept for a long period of time (several years) is invested so that it is not losing purchasing power. This is why investing, not just saving, is the secret to long-term wealth accumulation. However, most of us need a cash emergency fund available in case of unforseen disaster.

John is an excellent saver and has accumulate a $20,000 emergency fund (enough to cover 3 months living expenses).

In ten years time, assuming John doesn’t fall victim to lifestyle inflation, his emergency fund will only have $15,526 of purchasing power (Just over 9 weeks of living expenses). If he doesn’t ever use his emergency fund, he will need to keep topping it up each year to keep pace with inflation.

Mortgage interest rates are generally higher than inflation (although at the moment, not by much). By saving cash in an offset account, it is saving enough interest to compensate for inflation.

Good savers, accumulating tens of thousands of dollars in their offset and planning to keep it there for a year or more will benefit. A mortgage offset is an ideal place to save for your next car, childrens’ education and store your emergency fund. Offsets “pay” more the higher the interest rate.

Credit card users

Those who use, and pay off credit cards every month can keep monthly income in their offset account for the 55 day interest free period of certain credit cards.

2. You will Pay less Tax

Any measly amount of interest paid on a savings account is taxed at your marginal rate. For those with a non-earning partner, an account in their name alone would pay no tax. Anyone who has earned more than the tax free threshold ($18,200) will pay tax on interest at their marginal rate (up to 45%).

Offset accounts save interest payable, but don’t pay interest. There is no taxation on interest earned, making offsets a tax efficient strategy.

Self Employed Earners

If you pay tax quarterly or annually rather than by PAYG, the tax you owe can be reducing your mortgage interest bill until the payment due date.

3. You Will Pay More Fees

A mortgage with an offset account will generally cost more than a basic “no frills” account. A mortgage offset is more advantageous the higher interest rates are, and the more you will have saved sitting in the offset account.

Many home loan packages charge around $400 per year in comparison with bare bones loans that may have no annual or monthly fees. A mortgage offset may also charge a higher interest rate than the bare bones loan.

There are other factors that affect the interest rate you are offered. These include how much you are borrowing, your loan to value ratio (how big a deposit you have), credit score and whether the loan is for a home or investment.

To work out whether an offset account will save more than it will cost, you will need to estimate have much you will have saved long term in the account. It needs to be in the tens of thousands generally. Compare this with the additional cost of the interest premium, and extra fees.

Additional Fee from Offset + Additional Annual Interest NEEDS TO COST LESS THAN Savings X interest rate for you to benefit from an offset

An additional $400 annually in fees would require more than $13,400 in savings at 3% interest to make the additional fees of having a mortgage offset acccount worthwhile.

4. You will Maintain Flexibility

Situations change faster than you expect. Next year you might get the opportunity of a lifetime, and need to move interstate. Keeping savings in your mortgage offset account instead of paying the mortgage down directly, means that you can withdraw the extra repayments and maintain tax deductibility.

Imagine you have a mortgage of $500,000 and store savings in a mortgage offset account totalling $100,000. You can withdraw the $100,000 after deciding to rent out your home. The entire interest bill on your $500,000 can now be deducted against income, reducing your tax bill, or allowing negative gearing. The $100,000 withdrawn can be used as the deposit for your next home.  This can be great when utilising rentvesting, reverse rentvesting or turning your home into an investment property.  

If had the same $500,000 mortgage and paid $100,000 into the mortgage directly (with or without redraw feature), only the interest on the remaining $400,000 can ever be deducted again. This is a really common error.

You may not think you are going to move, but if you have an offset account anyway, it makes sense to keep your options open incase circumstances change.

Property Investors

If you have extra savings and put them into your investment property offset rather than direct them to the mortgage directly you can withdraw your savings when you suddenly need a new car. The mortgage unpaid remains tax deductible.

5. You can Use Mortgage Offset Cash to Replace the “Cash” Allocation in your Portfolio

It has never made sense to me having a percentage of cash included in investment asset allocation. Asset allocation is often presented as a pie chart as below

The idea of asset allocation is to

  1. Diversify your investments – no-one can consistently pick the best performing asset class for the next decade. Owning a bit of everything means you will own some of the best.
  2. Smooth performance. By investing in one asset class that falls, whilst the other rises, your overall year to year performance is likely to be less volatile.

The traditional cash allocation is low risk, low volatility and low return. But we all need some cash, as an emergency fund. It makes a lot of sense to me to have my only cash allocation as my emergency fund and general cashflow in a mortgage offset account. This way, at least my lowest risk investment is still keeping pace with inflation.

What Types of Offsets are there?

There are partially and fully offset accounts. Partially offset accounts will offset a pre-agreed amount of your savings (say 50%) against the mortgage.

The better and more common option is a 100% offset account. If you have $10,357 in your offset account you will not pay interest on $10,357 of your loan. Ideally you want a loan where the interest savings are calculated daily, so temporary increases (pay day) in your balance make an impact on interest paid.

What Kind of Mortgages Are Offsets available for?

Variable vs Fixed Rates

Traditionally, offsets have been available for variable rate loans, either principal and interest or interest only.

“Variable” loans change the interest rate you pay on a loan with minimal notice. The Reserve bank of Australia meets 11 times a year to decide whether interest rates should change. The banks may change rates in line with the RBA decision, choose not to pass on a rate cut, or apparently increase rates without RBA advise.

Fixed loans have a fixed interest rate for a predetermined length of time (often 1-3 years). This provides peace of mind, and are particularly useful for home owners who would struggle with an increase in interest.

Recently I have noticed fixed rate loans offered with 100% offset accounts attached. This sounds enticing for those requiring security of a fixed rate, but check out fees and interest rates charged carefully.

Despite them sounding a bit of a rort, most borrowers have been financially better off with a variable rate. The banks price in likely interest rate movements in the fixed rates offered. The banks have far better information than you or I to base their predictions on. Whether the variable rate advantage will continue during these times of ultra low interest rates remains to be seen.

Principal and Interest vs Interest Only

“Principal & Interest” loans require you to start paying the loan capital back from day 1. Interest charged gradually reduces as the loan is paid back.

“Interest only” loans do not require you to repay the loan, only to pay interest charged each year. These are usually in place for 1-5 years, when they will revert to a principal and interest loan. The principal then needs to be repaid over the remaining 25-29 years unless refinanced.

Interest only loans can be useful for property investors looking to maximise tax efficiency. They may also be useful for home owners who have fully offset their home loan. The offset cash can be withdrawn if the home is later used a rental, and tax deductibility of interest maintained.

When the loan term comes to an end, borrowers have got into trouble because they are unable to refinance. Lending conditions have significantly tightened, some homes have fallen in values and personal circumstances changes. If the borrower has no ability to refinance, repayments skyrocket, and they can be forced to sell.

What is the Difference between an Offset and Redraw Facility

These two look very similar initially. An offset and redraw are both ways you can use savings to reduce the interest paid on your mortgage.

They both theoretically allow you to withdraw those savings (and consequently increase the interest paid again).

However, the bank have control over money in a redraw account, and not in an offset. Should a major economic calamity occur, the bank can stop cash redraws if you (or they) are in a financially precarious situation.

In contrast, your offset money is yours, and you have the right to withdraw it at any time without permission.

Redraws can also sometimes be limited, either by needing to give notice, or by the amount or frequency of withdrawals. Offsets generally have no such restrictions.

What is a Comparison Rate

A comparison rate is always quoted alongside the interest rate offered on mortgage products. The comparison rate includes fees alongside interest payments for a $150,000 over a 25 year loan.

The idea is that you can directly compare the total of one mortgage product against another. Unfortunately, most will be borrowing far in excess of $150,000, making the interest rate a bigger factor for larger mortgages. It is worth looking into fees in detail to calculate which product will be most cost effective for you.

Who is a Mortgage Offset Not Useful for

Broke first home buyers who don’t expect to be able to save much will not benefit from an offset account. If you are in this situation, make sure you can definitely afford the loan!

What is a Mortgage Offset: How to Find a Loan

You should have a clear idea of whether a mortgage offset is suitable for your situation. Start by checking out options on a comparison site such as Canstar. Find yourself a mortgage broker to help you negotiate the best deal. Take the time to do the maths for your personal situation and find the best loan for you.

Two to FIRE ETFs Strategy: Earn, Save, Invest & Repeat.

Thanks to Ms Fiery Ice for this week’s article: ETFs Strategy: Earn, save, invest and repeat.

Each week, I have asked a finance blogger or podcaster to share their personal wealth building strategies. I am hoping these will be useful to compare different strategies and perspectives to provide ideas and insight in your own investing journey.

Ms Fiery Ice runs the personal finance blog, Twotofire. She approached Empower Wealth to explore the idea of growing a property portfolio. In contrast to my own strategy, Two to fire decided property investment was not for them after all. If you are considering property investing, read both sides of the argument to see which suits you best.

So, what did TwotoFIRE choose instead? It’s always interesting to find out how finance professionals choose to invest themselves.

Name/ Online identity: TwoToFIRE


“9 to 5” profession:

 I am employed in the Finance domain and Mr. Fireball works in Marketing for a startup.

Side Hustles:

We currently don’t have any side hustles, other than our blog. Don’t think it will qualify as we do not use it to generate any income at present. For us it is more of a platform to learn, reflect and share.

What are your investing goals?

The goal of all goals is to attain “Nirvana”. If only money could help with that! We are aiming for the next best thing “Financial Freedom”. That is the goal which will help us attain our aspirations to travel more, spend time with our loved ones more and do things that we love more. 

What is your investing time frame?  How far along are you?

Going by our current investment rate and an assumed (conservative) rate of growth of 4% our investments, we had a timeline of 10 years from when we started. We will complete 2 years in that journey shortly.

What is the most powerful wealth building tool available to you?

We believe compounding is easily the biggest tool available to any investor. We are also banking on it big time by automating our investments by utilising Dividend Reinvestment Plans (DRPs) where available or manually investing the dividends. We really have to see the magic once our corpus grows and the quantum of Dividends reinvested  along with it.

What wealth building habits are you utilising to reach your goals?

The main habits that we utilise are “paying ourselves first” and “restricting lifestyle creep”. By automating our investments we move a chunk of our earnings to our investment accounts so that that amount stays out of our “spend vision” which sounds like a super power but actually is the antithesis.

What is your strategy to achieve this?

Earn, Save, Invest, repeat. That would define what our strategy is in the simplest terms. How to invest then has many strategies, there again we try to keep it simple with ETF investing and maintaining a diversified portfolio. We write more about our investing strategy here.

How long have you been using this strategy?

 We’ve always been savers, but our savings would just languish in our bank accounts and effectively degrow. We only started seriously investing about 2 years ago.

Were there other strategies before?  If so, what made you pivot?

We never really had a strategy before. We were basically running in default mode. Our salaries would get credited to our bank accounts directly, we would spend pretty generously, but at the end of the day would still have sufficient funds still remaining in our bank accounts. We would then just let those sit around without a plan. So we were working to make money, but weren’t really letting the money work for us.

We’ve been in the workforce for more than a decade. And like every employee will tell you, the first few years of working are very exciting. Everything is shiny and new. But the sheen starts to wear off soon and you realize that you’re just a hamster on the wheel doing the same things day-in and day-out. Retirement is too far out into the future to actually be invisible and you don’t even have enough savings to think about an early retirement.

But about 2 years ago, we came across the Financial Independence Retire Early (FIRE) movement. Reading articles by the likes of Mr. Money Moustache & Aussie Firebug made us realize that there was a way to step off the treadmill. Since then we have been actively investing and also blogging about it.

What makes your strategy suit your personal situation?

Personally both of us are quite easy going who don’t want to take up additional work just to get out of work! Yeah we are pretty lazy. That is why ETF investing suits us. If it was not for ETFs  maybe we would not have gotten into share investing altogether and would perhaps have looked at other avenues! 

Where do you stand on home ownership vs renting?  Why?

 We stand where we are guessing many Sydneysiders would be standing and that is “eternally hopeful” to get into the property market. Though property investing is not aligned with our personal goals, it would be nice to have a residential property sometime in the future. At the moment it is renting for us and it might turn out that it will be like that forever. If we get into travel and geo-arbitrage once we reach our FI goal. We’ve written more about why property investing is not for at the moment here.

Where do you stand on the great property vs shares debate? Why?

Carrying forward from the above question, shares in our opinion provide the kind of flexibility and “real” passive income that we are looking for. Yes it can be argued that Property is more secure along with providing stable passive income. But for us, Shares it is!

Where do you stand on investing for capital growth vs income?  Why?

We believe both strategies have their own place and time. It can be a matter of personal situation and requirements. For example we are alright with capital growth as we do not depend on income from our investments at present. Also with our investment time horizon, we are comfortable with short term volatility. But once retired we might look at income more than capital growth due to the relative stability in dividends compared to capital growth.

Do you have any financial regrets?

Not having enough money to start investing and being very afraid of investing in the stock markets! That’s where we were at the beginning of our respective careers. We think that is one regret, we were actually quite good at saving right from the beginning but not good at investing. We are still not very good at investing but we have come a long way in our personal evaluation of our capabilities.

To see all the wealth building strategies shared with Aussie doc freedom, check out the Ultimate Step by Step guide to Wealth building, with wealth building strategies.

Aussie Doc Freedom is not a financial adviser and does need offer any advise.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

Kate Campbell from How to Money – Investing Started Young

Thanks to Kate Campbell for this week’s wealth building strategy. For those of us over 30 (or 40), there is absolutely no use crying over spilt milk. But for any young readers, you have the Most powerful investing strategy in investing returns available to you…lots and lots of time!

Each week, I have asked a finance blogger or podcaster to share their personal wealth building strategies. I am hoping these will be useful to compare lots of different strategies and perspectives to provide ideas and insight in your own investing journey.

Name/ Online identity:

Kate Campbell – Editor and Host of How To Money


How To Money Australia

“9 to 5” profession:

Kate Campbell is a podcast Host & Personal Finance Educator & Juris Doctor Student (Aussie doc: postgraduate law course, I had to clarify!)

I currently work at Rask Australia, an Aussie start-up providing investment research and financial education resources, in a marketing and education role.

It’s the perfect role for me, as I’m passionate about improving the financial literacy of other Australians. I also host The Australian Finance Podcast and the How To Money podcast, which is a lot of fun.

Aussie Doc: I’ve listed this as one of the best finance podcasts. It’s ideal if you don’t know where to start with learning about investing.

Side Hustles:

At the moment all my hobbies and side projects are costing me money, but I’m actually super okay with that!

What are your investing goals?

My main goal is to become financially independent and always look after myself. I am also working to develop my confidence with researching and investing in individual shares (which is most definitely a work in progress)!

What is your investing time frame? How far along are you?

I started investing in 2017 with a managed fund and a few shares here and there, as I tested out the waters and started learning all there is to know about personal finances.

Investing will definitely be a lifelong journey for me, but I’d love to be well on my way to financial independence over the next two decades!

What the most powerful wealth building tool available to you?

I’d have to say at the moment it’s time. Being in my 20s I’ve got the chance to take advantage of getting my finances sorted early, learning at much as I can and letting compound interest do the heavy lifting over the next few decades.

What wealth building habits are you utilising to reach your goals?

The most important thing that’s helped me get to where I am today is by focusing strongly on my education. Not only has that helped me forge my own career path, but spending time to understand my personal finances has opened up the world of investing to me.

The second wealth building habit that I’ve been using is automating and simplifying my financial plan as much as possible. This includes automatic transfers of money into different accounts when I get paid, setting up regular contribution plans on my investments and scheduling calendar events to review my financial plan each month.

What is your strategy to achieve this?

Over the last few years I’ve set up a number of accounts to enact my financial plan, which I reset on a yearly basis and review on a monthly basis. This includes use of ETFs, shares, managed funds, Super and cash. I make sure that I’m able to pay myself first and invest each month, so that I’m looking after my financial future.

How long have you been using this strategy?

I’ve been developing my strategy over the last five years, and it’s definitely still a work in progress! Over the last two years I’ve refined my investment strategy as much as possible, to give me time to focus on other areas of my life.

What makes your strategy suit your personal situation?

I’m so grateful that I’m young and have plenty of time to let things play out. As long as I focus on getting the big things right now, like diversification, low fees, automated investments and knowledge, I don’t have to worry about the small things like coffee.

I don’t believe you ever stop learning on your personal finance journey, but you start to work out what goals are essential to your peace of mind (like having an emergency fund), and when you’ve done enough.

I’ve also learnt that progress for the sake of progress isn’t a constructive approach, and it’s beneficial to fully understand the motivations behind your goal and what the end result will look like to more effectively achieve it.

Where do you stand on the great property vs shares debate? Why?

I was hoping to go travelling in 2020, so my main focus was saving up for that and the thought of saving up a house deposit hadn’t even crossed my mind! That being said, 2020 did lead me to learning more about property and I wouldn’t mind purchasing a place in the next few years.

Property and shares are not mutually exclusive though, you can invest in both (and in a well-diversified portfolio that’s probably a good idea).

I will mention that there’re other ways to invest in property besides buying a physical house. REITs (real estate investment trusts) and certain ETFs are a simple way to get exposure to the Australian and international real estate and infrastructure.

Where do you stand on investing for capital growth vs income?  Why?

My focus at this stage is definitely capital growth. Sure, getting a dividend is a nice bonus, but over the next 40 years I want to maximise my money’s ability to compound.

I think there’s definitely a time for both approaches, and it’s all about knowing your own goals, risk profile and time frame.

Do you have any financial regrets?

Hmm…I don’t really regret all the mistakes I made at the start of my investment journey as I learnt from them, and it helped me to improve my own knowledge and confidence. I’m so lucky that I learned about investing when I only had a small amount of money, because it meant any losses were bearable, and I was able to learn and move forward from them.

To see all the wealth building strategies shared with Aussie doc freedom, check out the Ultimate Step by Step guide to Wealth building, with wealth building strategies.

Aussie Doc Freedom is not a financial adviser and does need offer any advise.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

How to Spend Your Inheritance

If you have recently recieved an inheritance, I am sorry for your loss. Money comes to us, under these circumstances, with complex emotions. As a result, we often treat it differently to money from other sources.

The average Australian leaves over half a million dollars to distribute from t their estate when they die. Each beneficiary recieves on average $79,00 and this is growing above inflation annually. The wealthiest 20% of the country recieve more than their fair share of inheritance (38%), widening the wealth inequality in Australia. Wealth families are able to prioritise education, and have financial education, as well as gifts to pass on to the next generation. It’s natural to want to give kids a helping hand. But beneficiaries are getting older, as parents are living longer. The most common age to recieve an inheritance is now 55-59 years of age.

Are you reading this because you have, or expect to recieve an inheritance? It would be a shame not to maximise this sad gift and opportunity.

How to Spend Your Inheritance: Slow Down

If you have recently experience the death of a relative, now is probably not a great time to make major life decisions. Put the cash in a mortage offset, term deposit or bank account and give yourself some time. The time needed probably depends on your relationship with your generous benefactor, your emotional state and whether you have a financial plan already written up.

If you have already spend the time creating a written financial plan, there may be very little decision making to be done. You can use (most of) your inheritance to get ahead with your investments.

Should I Get Professional Advice? Do I need to pay tax?

If you have a large inheritance (say, over $100,000) you may feel the need for professional assistance. Take care choosing a trustworthy advisor, with this amount of money you can easily become a target for unscrupulous scammers.

If you are recieving superannuation as a non-dependent, there are tax complications that you should get professional advice about. Otherwise, there is no inheritance tax in Australia. The ATO will consider the value at the time you recieved assets as your “cost base” and only tax income or capital gains above this if and when you decide to sell.

Pay off Debt

If you have any high interest debt, such as credit cards, car loans or personal loans, this is your opportunity to get back on track.

Be warned though, without a change in your earning/spending behaviour, you will fall back into debt, and will have given away your inheritance and have nothing to see for it.

If you have fallen into a bad debt cycle, read the Barefoot investor, follow Dave Ramsay and get some help from a financial counsellor.

“Bad debt” is debt incurred for liabilities, or purchases that decline in value over time (car, computer, clothes..). For these, you are paying interest and losing money in value at the same time. They should be paid off as soon as you have a strategy to avoid falling into the same trap.

“Good debts” are debts incurred for assets that are expected to provide you with income, or capital gain over time. Education expenses, home loans and investment loans are generally considered good debt, although I have explored the detail of this in Good debt, bad debt, whats the difference.

You could pay off your mortgage, a good, defensive move if you are planning a drop in income in the near future. Parental leave or burn out prophylaxis?

Paying off investment debt is slightly less efficient, considering it is tax deductible. This would be another great defensive move for those already getting close to their desired retirement age (or those with enough cash in investments).


Saving accounts pay so little interest at the moment, it’s almost zero. Consider, over the long term inflation will devalue your money, you are actually losing money by keeping it in a bank account. If you have a mortgage offset, you at least will be beating inflation.

Save your money for a period of time to educate yourself and explore your options. Keep it in a savings account for the minimum required, and only if you are saving for a specific purpose. Otherwise, if you have many years (10+) until retirement, consider investing your inheritance.


Again, we come to needing a financial plan. If you need some inspiration in how to reach your goals check out the wealth building strategy series.

You have broad options of the stock market (most would consider passive investing using ETFs), a bond index (this is not an investment bond) for those wanting less risk and willing to tolerate lower long term returns, residential or commercial property.

Whatever you choose should be part of a well thought out plan. Passive Investing Australia has a well set out and logical site educating readers about the stock market.


For a double high taxed couple, super, property or LIC with a dividend substitution plan. Superannuation is an easy way to invest your money, you can dollar cost average into your account without brokerage. It won’t let you panic and withdraw your cash before preservation age. You may even be able to get some tax breaks if you are not already maxxing out concessional contributions.

Property investment with high capital gains potential (expected increase in value over time) is also a tax efficient and leveraged way to use your inheritance, depending on your risk profile.

Blow it Wisely

The thing to avoid here is accidentally spending your money. It can easily just gradually disappear from your account, with rounds of drinks, new clothes or shoes, car repairs etc. No matter how small your inheritance, honour your benefactor by spending your gift consciously and wisely.

If you have an account you can keep it separate from your day to day spending this is helpful. A fabulous holiday, car upgrade, piece of jewellery or swimming pool aren’t a wasting your inheritance if it is something you truly value and will not look back on without regret.

Unfortunately, us humans are terrible at predicting what will make us happy. Take your time and ponder.

Before treating yourself, though, make sure you have a financial plan and that you are on track to hit your goals. If not, strongly reconsider using your inheritance to move you towards your goals, rather than away.

For those planning on investing their inheritance, a small amount spent on something personal in honour of your loved one is a nice gift for yourself.

My Inheritance

Take 1.

I recieved a token $200 inheritance, as one of many grandchildren. I purchased a necklace to honour my wonderful grandmother.

Take 2.

The second inheritance, from my other grandmother was more substantial. $20,000 isn’t a life changing amount. But it does have significant potential to start an investment. I recieved it in my expensive 30s, with a large (ish) mortgage and hoping for children in the near future, money felt tight.

A wise move would have been to use this gift to start a regular investment into an ETF. Or I could have used it to pay down the mortgage (a little) and save up for planned parental leave.

I did neither of those things, I blew it on putting a pool into our yard! My grandmother was terrified of water until aged 70, when she learnt to swim (I’m actually not sure what prompted this!)

So it seemed rather appropriate, therefore, to use her gift to build a pool. My two kids have learned to swim, and played for hours in our pool, and it brings our family incredible joy. With COVID lockdowns, I appreciate our luxuries at home more than ever. Nan left my grandfather, who survived a few more years, kind of lost without the boss (nan).

Take 3

My grandparents were always frugal, perhaps they are who I got my interest in finance from. Despite, I imagine, not a fabulous income, they had saved large amounts of cash and paid off their home by the time my grand father died. This was stashed in a bank, so I guess they hadn’t found an interest in investing. Better than under the mattress!

I recently recieved the bitter-sweet gift of an inheritance from my grandfather, almost $60K. As well as the inevitable emotions, this money is substantial enough to come with responsibility as it’s custodian.

At the moment, this money is sitting in an offset account. My plan is to dollar cost average into ETFs, while slowly paying off the mortgage at the same time.

My Planned Inheritance

Right or wrong, I hope to give my children a helping hand as they grow up. I’d like to pay for their tertiary education costs if they attend, or perhaps contribute to their first home. We also plan to leave our (hopefully paid off) properties as an inheritance. More importantly, I think it is so important to teach children the skills to handle their money effectively.

“Hard choices, easy life. Easy choices, hard life”


Spend some time thinking through the most valuable use for your inheritance (and I don’t just mean in a financial sense!) Pay off bad debt, treat yourself carefully and consciously, and research investment options. Honour your benefactor by not wasting a dollar.

Pay off Mortgage then Pivot to Shares – His Her Money

Thanks to Alex and Ellie from HisHerMoneyGuide for this week’s wealth building strategy: Pay off Mortgage then pivot to shares.

Each week, I have asked a finance blogger or podcaster to share their personal wealth building strategies. I am hoping these will be useful to compare lots of different strategies and perspectives to provide ideas and insight in your own investing journey.

Name/ Online identity:

Alex and Ellie from HisHerMoneyGuide.


“9 to 5” profession:

Ellie is a researcher and Alex is a government project officer.

Together we earn about $220,000 a year pre-tax from our salaries. We derive extra income from investments, and to a lesser extent from side hustles.

Side Hustles:

Our biggest side hustle has become online surveys. It’s not exactly lucrative, but it’s easy money that you can earn at any time.

Additionally, we collect bottles and cans for cash under Queensland’s Containers for Change deposit scheme (why not do your bit to clean up the place while earning a little on the side?).

We also blog and get a small amount of money from banner ads, and we also technically earn a small amount from loyalty reward programs (frankly they’re more of a refund than income though).

What are your investing goals?

We’re aiming for what some call “FatFIRE” or a high income level of financial independence and early retirement.

Basically we’re wanting to have enough money behind us to retire early in our early-to-mid 40s, move away to the beach, and have a passive income that will support us to live a comfortable day-to-day life as well as allowing us to travel for up to five months of the year.

We’re both in our mid-30s at the moment, so we’re still a bit away from attaining those goals. However, as of our last net worth calculation, our assets total about $2.5 million.

Aussie Doc: Net worth = Total value of assets – Total debt (inc mortgages). This is an incredible net worth to have at such a young age!

So we’re well on our way, with pretty significant passive income from share dividends.

What the most powerful wealth building tool available to you?

You are easily the most powerful wealth building tool you have available. Whether it’s up-skilling to improve your career and earnings, taking on a side-hustle however big or small to increase cash flow, or being willing to take on bigger projects like a business or house flipping.

Not everyone can land a great job, but with effort you are the best placed person improve your financial position. Individual strategies are just forms of optimisation, but you won’t get where you’re going anywhere near as far if you don’t maximise your earnings. What you do with that money is another question.

What wealth building habits are you utilising to reach your goals?

Adding to the point above, you can’t save what you don’t earn; but you can’t save what you spend.

Thankfully being frugal comes easily to both of us, so aside from having good incomes our key habit has been to save as much money as we can. This willingness to save money has given us an annual
savings rate of nearly 90%.

Aussie Doc: Check out the site! Savings rate since they started blogging 80-90%! They have paid off the mortgage on their home.

We shop around to cut costs on everyday expenses like groceries, because it all adds up over time.But we also hadn’t been afraid to get our hands dirty to save money through DIY home renovations and house flipping.

All of this means we have more money at our disposal to play with. Most
importantly, that gives us options (a kind of pre-financial independence, if you like).

There are people who have earned and saved more than us at a younger age, or had better investment returns. But by both of us having been frugal before we met, it meant that we had some money behind us from a young age. Rather than hiding that money under the mattress or in a bank
account, we’ve then used those savings to make our money work for us.

What is your strategy to achieve this?

We have a couple of investment properties, which will provide us with a level of steady, diversified income. For now though they’re simply slowly paying themselves off until we put more effort into paying off their mortgages.

However, the bulk of our investments are in shares. We primarily hold individual shares, followed by holdings in Listed Investment Companies (active entities that hold shares in multiple companies), and in passive Exchange Traded Funds (which track various indices – in our case we’re chasing dividend returns).

First and foremost we are dividend investors. Our goal is to never need to sell down shares (aka a 0% withdrawal strategy), and instead live off the passive income they produce.

We see sequence risk and declining decision making as we age as unacceptable threats to our early retirement plans. The solution is working a year or two longer to build a larger portfolio that is geared towards income over capital growth.

How long have you been using this strategy?

Living off passive income was our main goal since we met some seven years ago and started investing together.

However, the strategy has been refined and tweaked over time as we learned more about investing.

Since then we’ve disposed of some shares that didn’t fully meet those goals, but the bulk of our portfolio has remained the same, and apart from some small ‘play’ holdings that are geared towards growth we’re pretty set now.

Were there other strategies before? If so, what made you pivot?

Ellie was always a share investor, but Alex started out with property investment as the key goal for FIRE.

That changed after seeing the liquidity of shares, arguably better returns, and the fewer headaches you have compared to holding and maintaining properties.

What makes your strategy suit your personal situation?

We’re both fairly risk adverse, and a 0% withdrawal strategy seems to be the safest strategy of all.

The one risk is that our passive income fails to increase with inflation, and gradually erodes our income. But that’s where superannuation comes in as a safety net (or a big income booster if our investments do match or even beat inflation) when we’re a bit older.

Additionally, we also want to experience life at its fullest, so having enough money behind us to do that is imperative. Experiencing the world, unfortunately, requires money.

That means we need to build a sizeable portfolio to support and sustain such a lifestyle. So essentially we combined those two things to build a portfolio that will hopefully provide us with a quite large passive income, with few headaches, as well as providing us with financial security if we
encounter any complications such as health issues.

Do you have any financial regrets?

Thankfully we don’t have any huge financial regrets, but we still do have some. The biggest one is not working earlier, which would have enabled bigger savings from a younger age.

So if Alex had worked during high school or university, we would currently be benefitting from the snowball effect that compounding creates. Even a few thousand dollars extra earned back then could have made a difference by now.

So going back to an earlier question, your willingness to earn money is your the biggest asset when it comes to building your wealth towards whatever goals you have.

Thankfully that lesson was learned before it caused too much harm.

Where do you stand on home ownership vs renting? Why?

We’re firmly in the home ownership camp. The financials for renting work out fine enough, but for us we simply want the security of our own home.
There’s an intangible attraction to having our own corner of the world to call our own.

It’s an asset we can sell if we need to. And perhaps most importantly we don’t want to be at the whim of a landlord who might have demands that we don’t want to meet, or who might sell the property out
from under us and force us to move.

Thinking ahead again to when we’re much older, those aren’t worries that we want to have.

Where do you stand on the great property vs shares debate? Why?

We’re fans of both – though prefer shares.

People ultimately need somewhere to live, so there is always a need for rental properties – especially if you buy into areas that will maintain demand in the future. So property can provide a nice level of
long-term diversification for an investment portfolio.

However, as mentioned earlier property comes with some headaches when it comes to maintenance. Owning a portfolio of many properties would
likely come with many stresses. So like many things in life, we suppose it’s about moderation.

Shares, however, provide liquidity if you need to sell. They generally have better returns as well (whether it’s via income or capital growth). They also don’t go into arrears on rent or have a hot water system break on a weekend – so they’re pretty headache-free.

To see all the wealth building strategies shared with Aussie doc freedom, check out the Ultimate Step by Step guide to Wealth building, with wealth building strategies.

Aussie Doc Freedom is not a financial adviser and does need offer any advise.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

The Best Valentine’s Gift? Super Contributions for Your Spouse.

Whilst not conventionally romantic, making super contributions for your spouse can supercharge both of your financial futures.

Just as combining living expenses results in lower costs for each of you, joining forces in retirement planning can bring outsized benefits. All it takes is a bit of smart forward planning.

Plan for Your Ideal Retirement

Spend some time planning some big, hairy audacious goals, including ideal retirement age and lifestyle.

Ensure you have a financial plan organised and written. Superannuation is such an advantageous vehicle, no matter your age you’d be daft not to take advantage of the best benefits. Salary sacrifice into your superannuation to recieve tax discounts and allow your investments to compound tax free for decades.

If you want to access funds before reaching preservation age, you will also need investments outside superannuation. Read more about building your wealth here. Now let’s get back to couple super strategies.

Super Contributions for your Spouse: Spouse Contributions

If your spouse’s assessable income is less than $40,000, you can claim a $540 tax offset by making a spousal contribution of $3000. That equates to an 18% guaranteed return, tax free (beat that!)

This is a no brainer for couples with a high and low (or no) income earner, and periods of time when either of you stop earning money for a period of time (unpaid parental leave, fellowship, travel etc).

Sure, money is always tight during these periods, but the returns are worth extra planning and saving, if possible. Any breaks from paid employment will make a big dent in your superannuation savings over the long term. The spouse contribution will help to lessen this.

You could save it all up to dump in towards the end of the tax year (allow time to process), or pay $115 per fortnight over the whole year.

Fine Print

Your spouse must have a super balance less than $1.6 million and have contributed less than the non-concessional cap that year (currently $100,000).

The $3000 must be after tax. Importantly, you are not eligible for the offset if super splitting (see below) rather than making an after tax spouse contribution (you can do both).

You can make spouse contributions until your spouse is aged 67 (or up to 74 if still working). It does not matter how old you are, as the contributor, but you cannot claim the tax offset if you are your spouse’s employer.

Your spouse’s superannuation company should have details online on how to make the contribution (ours had a dedicated Bpay number for spouse contributions). You then claim the tax offset on your tax return as described here by the ATO.

“Spouse” is defined in this case as someone you live with as a domestic partner, regardless of whether you married or are same/different gender.

Super Contributions for your Spouse: Super Splitting

There is a $1.6 million cap on superannuation funds that you can currently transfer into a tax free retirement income account after age 60.

There is widespread concern that superannuation will be seen as a giant honey pot by the government whenever they run out of cash.

If you retire with $1.6 million (in future dollars) spread between two accounts, you will be less of a target for the government’s next “Tax the rich” scheme than if most of it was in one account.

The cap could become less generous by the time you retire. Even if you aren’t likely to hit $1.6 million, it may be worth keeping balances evenly split in case the cap changes (or isn’t increased in line with inflation).

Super splitting allows you to split your pre-tax super contributions between you and your spouse. It does not allow you to contribute more than the $25,000 concessional cap. Your spouse has to earn and contribute their own super to be eligible for their own $25,000 concessional cap.

Again “spouse” can be your de facto partner, regardless of marital status or gender.

You can split your super contributions at any age, but your spouse needs to be under 67, or up to 75 and still working.

Your super split has to occur after the end of the financial year. You can split up to 85% of your super contributions, up to $21,250 to your spouse annually.

Couples cannot split your balance, other than your contributions for the past financial year, so it’s important to start splitting and keep doing this yearly until your goals are met.

In order to split super contributions with your spouse, download the form from your super website, complete and return it after the end of the financial year you are splitting income from.

Examples of Couple Circumstancs

The Even Stevens

The Stevens are the dream couple, working equal hours, sharing domestic duties, and child care responsibilities (if and when they come along) evenly.

They are, as a couple, the most tax efficient way to earn income – split evenly between the two, so both can maximise the lower tax brackets.

They will also have to pay tax on any investment income outside superannuation. I will assumed the Steven’s earn around $80,000 each for a total household income of $160,000 pre-tax.

Maximise Concessional Contributions Each to Save Tax

If they are good savers, they may be able to maximise $25,000 each concessional super contributions taxed. This would save $8,500 in tax for the couple. leaving them with a post tax income of $93,626 (+$50,000 in super) instead of $126, 026 (+0 in super). This scenario assumes the Stevens’ are both self employed, and have to make the super contributions themselves, claiming the tax concession.

If the Stevens’ are employed, their employers will contribute 9.5% into superannuation. You would therefore only have to contribute a further $17400 each to super via salary sacrifice. The additional contributions would save $6090 in tax between them, leaving post tax income of $103, 354 ($34,800 super contributions) between them instead of $126,026 (+$0 in super).

If there are periods of time when one of both spouses have lower incomes, the strategies listed below for the high and low income earner can be utilised.

Plan if Wanting to Retire Before Preservation Age

The Stevens were born the same year (awww!), meaning they can only access their superannuation on the preservation at the time. Currently this is 60 years old, but it may increase if government want to force the population to accumulate more superannuation before potentially relying on the aged pension.

If one or both of the Stevens’ wish to retire before the preservation age at the time, they will need income sources outside superannuation. This may mean it is impractical to salary sacrifice or tax deduct the maximum concessional contributions to superannuation. Higher income earners may be able to achieve both, however.

Read about wealth building strategies here, the big asset classes are property vs shares (assuming you want 7-10% returns). As the Stevens’ are both on the 32.5% tax bracket, deferring income and favouring growth with capital gains may be a more efficient way to build income over the long term.

High Earner and Low Earner Couple

The Joneses have a high income earning spouse, and a lower earning spouse or stay at home parent. The Joneses were also born the same year, for couples with an age gap, see below for further strategies.

Spouse Contribution

If one spouse is a very low income earner, they will be eligible for the spouse contribution. As above, an 18% guaranteed return on a $3000 super contribution for your spouse is really a no-brainer.

Low Income Super Tax Offset (LISTO)

The LISTO refunds tax paid on pre-tax super contributions ( that has been taxed at 15%) up to $500. Those earning under $37,000 are eligible, and the refund includes super guarantee payments by employers.

This is in addition to the super co-contribution. You do not need to apply for LISTO. As long as your super fund has your TFN, it will be applied automatically and paid directly into your super fund.


If you are working but earning less than $38,564 (but more than $100) you are also eligible for the super co-contribution. By contributing $1000 voluntary contributions to your super, the government will reward you with an extra $500 to your superannuation. I take it back, we could beat the spouse contribution with a 50% return with this.

$500 and $540, utilising the spouse contribution and co-contribution may not be huge amounts of money, but they are minimal effort, no risk (other than general risks of investment inside super).

Check out your super website to find the bpay link for contributions, and let your accountant know at tax time to claim the co-contribution.

Super Splitting with your Spouse

As explained above, it makes sense to aim for your super balances to be roughly equal leading up to retirement. Splitting your superannuation with your spouse doesn’t cost anything, but won’t increase the high income earner’s concessional cap.

It is likely the government will continue to limit superannuation help to those with a low or moderate balance.

Putting money in to superannuation is great for asset protection, except in the case of divorce. Super will be included in the asset pool that gets divided in marriage break up, so splitting super doesn’t sacrifice protection.

Your superannuation balances affect eligibility to the aged pension. If you are of similar age, your combined super balance will be taken into consideration.

Part pension eligibility (2020) ceases when you own assets worth $583,000 for singles and $876,500-$1,031,500 for a couple.

High income earners can consider the aged pension a safety net in case of exhaustion of retirement savings.

You may have heard of the Carry-forward concessional contributions rule. The ATO now allows you to “Catch up” over 5 years if you haven’t maxed out the $25,000 concessional cap. You are only eligible to catch up if your super balance is under $500,000. High income earners planning a career break can split super to keep their balance under $500,000.

Couple with an Age Gap

The Smiths have a 10 year age gap between them. Age is just a number after all.

An age gap does create some challenges in relationships, planning a retirement together being one of them. If both spouses wish to retire together, retirement income for the younger spouse may need to last several decades.

Couples with an age gap often fear the older spouse becoming too infirm to enjoy an active retirement with the younger spouse. But an early retirement for the younger spouse can risk running retirement savings dry.

But an age gap also produces some potential advantages. The older spouse has had many more years of compounding interest to grow their retirement savings.

If the couple can live off the younger spouse’s income, super can continue to grow until both are retired. This gives the older spouse’s superannuation more time to compound – the most powerful factor in investment returns. The younger spouse can take advantage of employer pre-retirement work flexibility to provide a semi-retired lifestyle.

The transition to retirement scheme can reduce your tax, allowing the same lifestyle whilst working less

Super Splitting to the Older Spouse Allows Early Access

If the couple plan far enough in advance and save extra, an early retirement for the younger spouse is possible. The older spouse needs enough super balance to support the couple until the younger spouse reaches preservation age. It is best to over split slightly, given the preservation is likely to increase in years to come.

This is a big advantage for the couple with an age gap. They don’t have to invest outside superannuation for an early retirement. They can most likely make their entire retirement income tax free (or minimize tax if rules change).

But splitting superannuation to the older spouse has some disadvantages. If the older spouse may be eligible for the aged pension, extra super balance may reduce aged pension eligibility. If the older spouse becomes requires aged care, their super balance will be used in means testing.

Super inside a spouse’s account, before they reach preservation age is not included in government asset tests for aged pension or aged care.

A lump sum withdrawal can be made to pay off debt (ie the home mortgage). But money taken out to hide in the spouse’s superannuation account to avoid the asset test is likely to be discovered.

Super Splitting to Younger Spouse may Improve Aged Pension Eligibility

This is a strategy more suitable for lower income earners. Part pension eligibility (2020) ceases when your assets are worth $583,000 for singles and $876,500-$1,031,500 for a couple. Any income earned by the younger spouse is also used to reduce the aged pension eligiblity.

If the older spouse maybe eligible for the aged pension at aged 67 (currently), the younger spouse will need to be under preservation age for their super balance to be excluded from asset tests.

Similarly, super belonging to a spouse under the preservation age is protected from asset testing for aged care.

Super Recontribution Strategy

If the older spouse has a larger super balance, the super recontribution strategy may be helpful.

The older spouse with a larger super balance can withdraw a lump sum once they reach preservation age. The lump sum can be recontributed (as a non-concessional contribution) to the younger spouse with a smaller super balance.

This can avoid breaching the $1.6 million accumulation account cap (and eliminate post retirement taxation). Recontribution (either to your spouse or your own super account) will increase the non-taxable super component. This can drastically reduce tax liability on inheritance by your non-dependent heirs (nothing like planning ahead!)

Super Contributions for your Spouse: Where to Next?

Maximising your super gets pretty complicated, especially closer to retirement. The cost of advice is often included in Super membership fees, so advice purely on super may be available for free. Otherwise, you need to find a financial advisor you trust to make sure you are making all the right moves. Hopefully this article has given you plenty of ideas and strategies to explore.

Check out the up to date guide to choosing a super fund.

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Aussie Doc Freedom is not a financial adviser and does not offer any advice.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.