Nifty Fifties - Get it Together
Are you turning 50 soon? This is the decade where you start to think about retirement and the big question of whether you will be able to afford the retirement lifestyle you are dreaming of. There are a number of money milestones you should be aiming for:
Supercharge your Super: By the time you are in your 50’s. ‘Salary sacrifice’ refers to the pre-tax contributions to your superannuation. Paying more money into your super now will mean you pay less tax and will have more income in retirement.
If you're self-employed, you may consider the value of your business as a substitute for superannuation, but this can be equivalent to putting all your eggs in one basket. Things outside your control could significantly impact on the value of your business, so it’s prudent to diversify and superannuation can offer a tax-effective way of doing so.
Check your Spending: This doesn’t just mean the expensive shoes or dinners out, it’s important to regularly review whether you are getting the best value for money when it comes to what you pay for electricity, phone, private health insurance and bank fees. You don’t want your hard-earned retirement income to be eaten up by unnecessary fees.
Invest: As you near retirement age you will have less opportunity to make up any losses. Ensure that your risk profile for any investments has been adjusted and is in line with your retirement goals. A diversified portfolio will produce consistent results. Don’t panic sell when your read something in the newspaper and make sure you are getting sound financial advice from Heart Financial Advisers.
Reduce debt: You don’t want to head into retirement still owing money. Aim to pay off any loans as soon as you can - student, car, credit card or mortgage. Start with the one that has the highest interest rate and work your way through. Investigate consolidating debts but remember it’s not a cure all for bad spending habits. Being debt-free will reduce your cost of living in retirement. In your fifties it’s important to begin to live a lifestyle that will allow you to accumulate as little debt as possible.
Estate Planning: If you don’t already have a Will, now is the time to do so. Speak to a lawyer or financial planner about an estate plan, appointing an Executor of your Will and a Power of Attorney to ensure your wishes are carried out.
Insurance: Now is a great time to review your insurances. It’s important to make sure you have the right level of coverage for your situation. Your life, health and income protection insurance all need to be reviewed to make sure the level of cover is appropriate. As you get older the chances of a major health event increase dramatically. Insure for those things that can have a major financial impact on your family, such as not being able to work, death or disablement or losing your house in a fire or flood.
“The Bank of Mum & Dad”: In your 50’s your children will probably be nearing the end of their schooling and becoming less dependent on you. This is often a time when you begin to think about whether you should contribute to their university education, save for a wedding, help with the purchase of a car or assist with a deposit on their first home. Just like airlines instruct you to put on your own oxygen mask first, your financial safety instruction should be to look after your retirement first. It will be more of a problem for your children if they have to support you financially in your old age than if you fail to buy them their first car.
Rainy Day Money: During your 50’s you are likely to be at the peak of your career, your children are becoming more independent and your ability to save is likely to be higher than before. Your emergency fund should aim to cover a year’s worth of expenses.
Stay Healthy: Your health is one of the most important investments you can make. The cost of preventable diseases like diabetes can be enormous when you factor in the cost of medications, specialist visits and hospitalisation due to complications. Poor health can also force you to retire earlier than planned. Unfortunately, in your 50’s the demands on your time from careers, family and even ageing parents can leave you with little time or inclination to exercise and eat well. Remember though, medical expenses increase exponentially as we get older, so make an effort as early as possible and invest in your health.
Ageing parents: You need to consider the fact that your parents and parents-in-law may need help to take care of themselves as they get older. This may involve time-off from work to take them to medical appointments or it might require financial assistance. This will also need to be factored into your budget.
Prep for your retirement: Have you thought about where you will live when you retire? What will you do all day? Now is the time to start testing out what you want your retirement lifestyle to look like. Visit the area you are thinking of retiring to. Join some clubs and social groups. This is especially important if you have been focused on your career and most of your socialising has happened within the work context.
Upskill: Your fifties can be a time of greater risk should you lose your job as it can be much harder to find a new one. Make sure to keep your skills up to date.
On the Side: Now can be a good time to turn a hobby or skill into a something more, freelancing or starting a small part-time business that can help pay off debts or contribute to savings. This can also be a source of additional income in retirement.
This information is current as at 10/12/18. This article has been prepared by Heart1Stop, a social media brand owned by Heart Mortgage Services and Heart Financial Advisers. The information contained in this article is an overview or summary only and it should not be considered a comprehensive statement on any matter nor relied upon as such. The views expressed here are not those of Heart1stop, Heart Mortgage Services, Heart Financial Advisers, shareholders, directors or staff and associated contractors and business associates. This article has been prepared without taking into account any person’s objectives, financial situation or needs. Because of this, you should, before acting on any information contained in this article, consider its appropriateness, having regard to your objectives, financial situation or needs. Any taxation information contained in this article is a general statement and should only be used as a guide. It does not constitute taxation advice and is based on current laws and their interpretation. Each individual’s situation may differ, and you should seek independent professional taxation advice on any taxation matters. While the information contained in this article may contain or be based on information obtained from sources believed to be reliable, it may not have been independently verified. Where information contained in this publication contains material provided directly by third parties it is given in good faith and has been derived from sources believed to be accurate at its issue date. It is not the intention of Heart1Stop or Heart Mortgage Services and Heart Financial Advisers that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. To the maximum extent permitted by law: no guarantee, representation or warranty is given that any information or advice in this publication is complete, accurate, up to date or fit for any purpose; and no party of Heart1Stop or associated entities as mentioned is in any way liable to you (including for negligence) in respect of any reliance upon such information. This article may also contain links to websites operated by third parties ("Third Parties") who are not related to Heart1Stop. These links are provided for convenience only and do not represent any endorsement or approval by us.