Ask Paul: Where to save money for our big trip?

Dear Paul,

In about six years my husband will turn 60. He will likely retire from his current role.

We are hoping to then buy a caravan and travel around Australia for a year.

I have estimated we will need about $100,000, which equates to saving about $650 per pay (fortnight) to achieve that goal.

He has a gross income of $80,000, half of which is non-taxable due to the nature of his work.

With deductions his taxable income is $35,000. I work casually and my taxable income is about $25,000.

Should we be saving this money in super so it can be withdrawn tax free when he is 60? If so, should we make concessional or non-concessional contributions? If not, where is the best place to invest this money? - Ang

That sounds like a great idea, Ang, and I am delighted that you have a plan to cover the cost of the vacation well in advance of you heading off.

If the plan is for your husband to retire at 60, super is certainly a good place to invest over the next six years.

As you know, you and your husband can salary sacrifice $25,000 into super, including your employer contributions.

Our tax system sees tax cut in at a taxable income of $18,201 at a rate of 19%, plus Medicare levy. With a 15% rate of tax on your contributions, there is a decent tax advantage in you saving via super.

The other plus is that a decent, low-cost super fund will give you a well-diversified portfolio.

I'd check your situation with your fund, but based on what you have told me, I suspect super is the way to go. While you are in planning mode, please also make sure you have a financial plan for when you return.

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