The second
consideration once you have financial buffers in place is to ensure you are
repaying enough money each month to achieve two things:
Any non-tax
deductible (home loan) debt is fully repaid a couple of years before you want
to retire/reduce working hours; and
Reduce
investment debt to the point that your investments are neutrally geared. That
is, the investment income is enough to pay for the interest cost. It is
unnecessary to repay all investment debt by the time you retire. It is
efficient to retain some gearing. However, you don’t want your investments to
be costing you money in retirement i.e., negative cash flow.
If you are
on track to achieve this optimal level of debt reduction, then any surplus cash
flow beyond those requirements should be invested in growth assets.
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Jason Gwerder
Thursday, 19 October 2023
