I’m in my 40s with $60,000 saved. What should I do with it?

I’ve saved $60,000 and am able to add about $2000 a month to that. What should I be doing with it? I am single, 46, have a mortgage that is quite manageable and no firm retirement plans, though I do like to be flexible.

Thanks for your question. Given you have a mortgage, parking your savings in an offset account would certainly be one option worth considering.

The return here is effectively whatever the interest rate on your mortgage is, probably about 6.2 per cent at present. That’s better than the interest you’ll earn on any cash account, and the icing on the cake is that you don’t have to share any of that return with the tax man.

Note there is no value having more in your offset account than what is owing on your mortgage. Excess money in an offset account produces no return at all. After accounting for inflation, you would be going backwards.

Money held in offset is fully accessible, so this satisfies your flexibility requirement and ensures you have funds for emergencies.

However, $60,000 is likely more than you require for any short-term needs or unexpected expenses, so you could potentially be looking to establish an investment portfolio for some portion of this pool. Your ability to add regularly would enable dollar cost averaging, which is a great way to build wealth and give yourself options.

Such a portfolio would be outside the superannuation system and therefore accessible at all times, albeit capital gains tax would become due upon sale, assuming the investments increase in value. It could be used for all sorts of purposes such as travel, early retirement, study or a career change.

Finally, you might want to consider whether some of your savings capacity could be used to salary-sacrifice to superannuation. Money added to superannuation is inaccessible until you are at least 60 years old, so I couldn’t imagine you would want to send all of your savings here.

However, using some portion of your savings capacity for this purpose would help to provide you with long-term security and also provide some tax savings in the immediate term as money salary-sacrificed to superannuation is usually taxed at 15 per cent, which is likely to be lower than your personal marginal tax rate, typically 30 per cent or more.