Pay off the mortgage at retirement, or keep it?
More Australians are reaching retirement still owing on the home. The instinct is to clear it with super and be debt-free — but it's not always the better move, and in Australia there's a twist most calculators miss.
Run it both ways
This runs the full RetireWiz engine — the Age Pension means test, tax and drawdown — for both choices, so the comparison is real, not a rule of thumb. It assumes your super and savings keep earning the return you set (7% a year by default) — the number to weigh against your mortgage rate. Both are inputs you can change.
What your super earns if you keep it invested — compare it to the loan rate.
≈ $24,456/yr in repayments
Shares, ETFs, funds, bank — assessed for the Age Pension.
Clearing it lifts your Age Pension by about $11,081/yr (less assessable super), and ends the $24,456/yr repayment.
Clearing the loan lowers your assessable super, so you qualify for more Age Pension — every year from 67.
- Age Pension (from 67)
- $7,485/yr
- Money lasts
- to 90+
- Age Pension (from 67)
- $18,566/yr
- Money lasts
- to 90+
“Clearing wins here — the Age Pension boost and the gone repayment outweigh keeping it invested.”
General information only, not personal financial advice. A deterministic projection in today's dollars on the assumptions you set — it runs the full RetireWiz engine (Age Pension means test, tax, drawdown) for both choices, but doesn't weigh market risk, your peace of mind, or the sequence-of-returns risk that makes being debt-free safer. Drawing a super lump sum to clear the loan is tax-free from age 60. Check your own numbers in the planner, and consider a licensed adviser.
Three forces pulling in different directions
1. Return vs interest rate
Keep the mortgage and your super stays invested. If it earns more than your loan rate (and in pension phase those earnings are tax-free, while home-loan interest isn't deductible), the money works harder left invested. If your loan rate is higher than your return, paying it off is a guaranteed “return” equal to the rate.
2. The Age Pension means test — the Australian twist
Your home is exempt from the assets test; your super and savings are assessed. So drawing super to clear the loan moves money from an assessed asset into an exempt one — which can increase your Age Pension by up to about 7.8% a year of the amount you clear (the assets-test taper). That pension boost is real cash, every year, and it's exactly what a plain return-vs-rate calculator ignores. It only helps if your assessable assets are in the taper zone, though — so the calculator also asks for your shares and any investment property; if you're already well above the cut-off, clearing won't move the pension. See the Age Pension calculator.
3. Cash flow, risk and peace of mind
Clearing the loan ends the repayment, so you need to draw less each year — and a smaller, debt-free drawdown is far less exposed to a bad run of early markets (sequence risk). Many retirees value certainty over a few extra dollars on paper. The numbers inform the call; they don't make it.
A few things to keep in mind
- Drawing a super lump sum to pay the loan is tax-free from age 60 once you've retired.
- Clearing it leaves you with less liquid super — fine if you keep a buffer, riskier if it drains your accessible savings.
- A partial pay-down is an option too — clear enough to ease the cash flow (and nudge the pension up) without emptying the nest egg.
- The pension boost only helps once you're Age-Pension age (67) and within the means-test taper zone — not if your assets are well above it.
See it across your whole retirement
The planner models the mortgage, the Age Pension and your drawdown year by year — and has a one-click “clear the mortgage with super” What-If so you can see the exact effect on your income and how long your money lasts.
Open the plannerGeneral information only, current at 2026-27 — not personal financial advice. Estimates in today's dollars on the assumptions you enter; your result depends on your own circumstances, and the calculator doesn't weigh market risk or personal preferences. Confirm current details with Moneysmart or a licensed financial adviser before acting.