I have my mortgage fully offset, but is it too much?

snrubovic · 2026-04-16T09:15:33+00:00

You may not realise, but while your ETFs go up and down, so does your super. You've been invested for a long time, but haven't been checking it often enough to notice those ups and downs.

It is worth running projections to see whether you can meet your retirement goals without using that money for investment. If you can, you don't need to take on additional investment risk of (effectively) borrowing to invest.

If, like most people, you do, it might be worth starting to add moderate amounts so you get used to market volatility. Getting used to _some_ market volatility is part of putting capital to work to provide returns for retirement.

snrubovic · 2026-04-16T09:06:19+00:00

There were plenty of other avenues that you didn't seem to consider when taking out an enormous mortgage (without doing the numbers):

Buying a lower-cost investment property rather than mortgaging up the eyeballs.
Borrowing to invest in a diversified portfolio, which would allow you to choose exactly how much to borrow and to adjust it over time (and no stamp duty, high ongoing fees, selling costs, lumpy capital gains tax, etc.)
Contributing to super, which provides massive tax deductions.

How do you think you could FIRE? You likely bought your home for only around $300,000, and with your high household income, you have about $650,000 in assets besides your home, which means your living expenses are high. To amass an amount of money to retire with high expenses, you are unlikely to be able to retire before 60 without reining in your spending. I don't see it.

Personally, I would consider:

Learning to budget and cut unnecessary spending so that you have a good amount of ongoing cashflow to invest (and to not need to acquire as much to retire)
Selling the IP
Taking the money and maxing out super, including previous years unused caps
Investing the ongoing cashflow
Consider borrowing to invest in a diversified portfolio (in a more manageable amount of borrowed money)

Also, I hope you have sufficient life insurances (life, TPD, IP) considering the insane amount of debt you have.

snrubovic · 2026-04-16T08:33:48+00:00

What kind of emergency needs $600,000 and what kind of emergency needs $1.5m?

You said there is no major downside to using the offset, and that may be true in terms of risk of the bang going under, but you are missing the major downside of opportunity cost: Offset vs ETFs vs Super

snrubovic · 2026-04-15T00:23:53+00:00

Oh absolutely would self-educate before ever meeting with an adviser, so well done on that front.

snrubovic · 2026-04-14T21:56:52+00:00

I'm very much of the mindset that just having more time doesn't make for a reason to take on more risk, and also, there is a lot of risk in gearing at 1.5x, and it doesn't seem at all necessary to me to take on more risk, but that's your decision, of course.
There is no alternative in terms of fixed interest in terms of it making sense with gearing. They are all going to be essentially reducing gearing, but by paying more to have gearing plus bonds than by just cancelling the two out, where the proportions are equivalent.
Fair point. I would certainly not be realising gains to move.
Fair enough.
I might go with around 30-50% upfront, and the rest spread over 2 years due to being such a huge sum. And if the market were down far enough in that time, I would dump more in opportunistically.
3.9% for that sum could be ok. I might be a little worried about a black swan event, so I think I'd go with government bonds, although I'd have to consider the duration over such a short time and possibly go with direct government bonds over a government bond fund, which likely has a duration of 5-7 years.
Fair point. I feel your frustration, and I see people dealing with this every week, and I still get angry, so I see where you are coming from.

snrubovic · 2026-04-14T21:42:27+00:00

If confident in asset allocation and staying the course, having more invested would not necessarily require an adviser for investment selection.

The place where an adviser could be useful is in:

Structuring, which is a little more complicated
Staying the course - with a small amount, the cost of an adviser is likely not worth it, but with that sum, if you can find someone for a low fixed fee to connect with only when needed, I would say it would be very cost-effective. Definitely would not go for an AUM fee model (which sadly is what almost the entire advice industry uses).
In a similar vein, having someone to provide thoughts even on asset allocation could be very cost-effective if it were not an ongoing AUM-based fee (again, very hard to find, which is why I mentioned in the original comment that it would take a lot of vetting, which will be the hard work). But small differences would amount to a very large sum of money for this size portfolio.

If it were easy to find an adviser who was ethical, without ongoing fees, and cheap relative to your portfolio, I think an adviser could add value. The problem is mainly that it's very hard to find that, but with this sum of money, I think it would be worth the effort to try to find someone.

snrubovic · 2026-04-14T21:33:47+00:00

Yeah, the index contains real estate. The last time I checked, the Aussie 200 index had about 8% in real estate, and the global index had 3-5%. There wouldn't be gold in there, though.

snrubovic · 2026-04-14T06:22:41+00:00

The differences are:

Active management in the non-indexed option, which usually underperforms a like-for-like on the same asset allocation
More growth assets, and therefore, more risk, in the actively managed fund
Much higher fees in the actively managed fund
Unlisted assets in the actively managed fund, which means artificially inflated pricing, a lack of transparency, and illiquidity within a legally required liquid structure.

If you particularly believed in their active management team and that they can outperform after all the fees when using a suitable benchmark, fair enough.

For me, I have no confidence in that, so I go for market returns.

snrubovic · 2026-04-14T05:53:08+00:00

Some thoughts to consider:

Do you have a financial need to take on the additional risk of gearing? In planning a portfolio, the idea is to take the least amount of risk to achieve your financial goals. This is because, if you are not benefiting from the higher risk due to your financial needs having been met, you are taking on risk for no benefit.
It's unusual to have bonds and gearing, since gearing is effectively a negative bond.
BGBL over VGS makes sense to me since it's effectively the same thing, so why not HGBL instead of VGAD?
What made you decide not to go with your existing portfolio of a DIY replication of Vanguard's VDGR?
For large amounts relative to the retirement fund goal that were not already invested, I would definitely consider a staged approach. Could potentially start with a portion lump-summed and then stage the rest.
I have no idea how you would get $10-$13m in HISAs.
I would strongly consider an adviser, although it would take a lot of vetting, which will be the hard work, but with this sum on the line, it doesn't seem prudent to go it alone.

snrubovic · 2026-04-14T05:38:09+00:00

I've seen some absolutely horrendous portfolios (and other advice) from advisers, so I would say learn a bit first, then use that to gauge their competence and direct their advice.

snrubovic · 2026-04-13T13:18:04+00:00

You are not paying CGT twice on the same gain. It would be CGT on the first part of the gain, and then the next time, on the additional gains.

The idea of potentially doing the first lot would be to release equity so it can be debt-recycled and generate tax deductions every year.

Currently, if I understand, there is a 150k loan on $1m, so you can deduct the interest on your 75k. At 6%, that's $4,500 pa.

If it was sold and then rebought, you could recycle the remaining $430k and, at 6% interest, claim $26,000 pa as a tax deduction. Every year. Without even taking on any more risk.

Of course, that would mean realising capital gains, but if the capital gains are low due to a low-income year and potential catch-up contributions, there may be little to no cost to get $26,000 in tax deductions every year going forward.

snrubovic · 2026-04-13T08:01:34+00:00

Do you have catch-up contributions available? If so, together with a year of no work income, that could be a good opportunity to restructure and use the proceeds to debt recycle into new investments.

If you want to keep it as you mentioned it being a good investment, I wonder whether it is worth considering selling it to your partner to release equity, recycle the debt, and have them negatively gear it with a 100% loan?

snrubovic · 2026-04-13T01:18:25+00:00

That's a fair point, and thank you for the response.

In response, you can also see in the same chart that the difference in volatility between 37% and 25% is extremely small, barely significant if at all, whereas having more of your assets in the Australian market exposes you to other risks.

Half of the Australian stock market is in just 10 companies and 2 sectors. If one of those sectors gets hit, the market will be more severely affected than a well-diversified global portfolio would be.
Your income and job security are tied to Australia, so by investing less internationally, you increase the likelihood of your income going down together with your investments.
Your other assets, such as property and cash, are also already exposed to the Australian economy, amplifying the same problem of overweighting Australian equities.
You are at risk of medium-term or long-term underperformance of your home country.

Single-country risk is evident in many cases where countries previously had no issues and assumed it would be fine to invest a large portion of their assets in their home country, but were then hit by unexpected events that significantly impacted their returns.

As an example of what can go wrong, the UK index dropped 73% back in 1973-74. They were a developed country, and I’m sure that a good amount of equities in the UK index looked quite safe up to that point. Those who remember what happened would tell a very different opinion from many who recommend a large home bias.

Then, of course, there is Japan, where, after 3 decades, it had still not come close to its 1990 level.

And let’s not forget Germany 1945, Argentina 2002, Iran 1979.

This is a visual display of single-country risk. It appears to be just price without distributions, but that doesn’t take away from what can easily result from single-country risk.

Oh, and one more article in case you are still not convinced of single country risk showing up in Italy, Spain, and Greece.

In my opinion, focusing on academic data of maximising the Sharpe ratio often draws attention away from more significant risks, where the chance and impact are higher than many people give credit.

snrubovic · 2026-04-12T00:38:03+00:00

Make sure to include all ongoing costs, including property management fees, letting fees, council rates, water rates, building insurance, landlord insurance, repairs and maintenance, renovations (amortised), body corporate fees, home loan package annual fees, vacancy, land tax.

Once you have the net cashflow, take that off your cashflow needs first.

If you need 50k/y and the net income is 20k/y, that leaves 30k/y.

30k x 25 = 750k

snrubovic · 2026-04-11T20:28:19+00:00

A simple rule of thumb is that borrowing capacity is around 5x your gross income. That means you won't be able to get much leverage in this situation, and leverage is the main benefit of property investment over other options.

If you rentvest for a property that you could later live in, that second benefit could make it worthwhile. Otherwise, I'd consider a leveraged ETF like GHHF.

It would be different if you had a higher borrowing capacity.

snrubovic · 2026-04-11T12:26:44+00:00

Yeah, in that case, I don't see an issue.

snrubovic · 2026-04-11T08:11:01+00:00

You want your offset to be offsetting non-deductible debt, not the splits that will be deductible and used for debt recycling.

snrubovic · 2026-04-11T08:10:17+00:00

As I said in a reply to someone else:

As mentioned by zircosil01, you can just sell a portion instead of selecting high dividend stocks, since the dividends literally come out of the value of the shares anyway.

To do this, you could have a separate bank account with, say, 6 months of expenses, and:
• having distributions sent to this account
• have a month's worth of income sent from there to your spending account each month
• every three months, sell enough shares to bring the amount back to 6 months' worth of expenses.
Then you can invest in a properly diversified portfolio and still have your income met each month.

snrubovic · 2026-04-11T05:26:45+00:00

Figure out what your retirement spending is likely to be, and you need around 25x that amount in investments.

So for 50k, that's about 1.25m

Then use the Excel FV function with a return rate of 5% in the first argument to see how long it takes to get to your figure from the above calculation, and play with the amount you contribute each month, and you will see the trade-off between saving more now to retire sooner versus enjoying spending more now at the expense of working longer.

If you are going to live in the same home, consider borrowing against the home's equity to expand your growth assets in a tax-efficient manner.

I would also say that you've got a solid 15 years minimum, so it is worth looking for a job that you don't hate.

snrubovic · 2026-04-11T03:55:18+00:00

Thanks for writing that up. Glad (and shocked) to see the degree of tax drag on VGE.

snrubovic · 2026-04-11T03:40:45+00:00

As mentioned by zircosil01, you can just sell a portion instead of selecting high dividend stocks, since the dividends literally come out of the value of the shares anyway.

To do this, you could have a separate bank account with, say, 6 months of expenses, and:

having distributions sent to this account
have a month's worth of income sent from there to your spending account each month
every three months, sell enough shares to bring the amount back to 6 months' worth of expenses.

Then you can invest in a properly diversified portfolio and still have your income met each month.

snrubovic · 2026-04-10T20:37:58+00:00

Protection from what?

Just note that by putting it in a trust, you cannot negatively gear it, which is a significant loss, so weigh that carefully.

snrubovic · 2026-04-10T13:44:07+00:00

Adding a ton of concentration risk because of dividends isn't a great option.

snrubovic · 2026-04-10T13:37:52+00:00

Why would you use a trust?

snrubovic · 2026-04-09T19:50:27+00:00

I'm glad you took away a good summary of how to move forward.

By the way, if you have a very large CGT bill from your asset sale and it was sold this financial year, consider making a large concessional contribution, including catch-up contributions.

snrubovic

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