The big 5-0! Who knew it’d creep up this fast? Thankfully, while there’s trepidation in ticking over to a new decade, the reality is your fifties are some of the best years of your life.
"50 to 65 is usually when people accumulate the most wealth,” says Dr Tracey West, a household and personal finance expert from Griffith University’s Centre for Personal Finance and Superannuation.
“Typically, children are older and associated expenses decline, and people reach peak earnings. Thus 50 is a great time to set in place a savings strategy with increased escalation year-on-year.”
Here are the five key life questions you need to ask in your fifties.
1. When should I retire?
The answer to this major existential question, of course, varies widely.
There’s no longer a fixed retirement age in Australia, but many choose to retire once they’re eligible for the Age Pension. This is currently when you turn 65 and a half, but it’ll rise in stages to 67 in July 2023.
“The decision [to retire] depends on how financially independent you are, how healthy you are, and even perhaps whether you have hobbies or goals you want to pursue,” says Dr West.
“Another factor to consider is the share market, because most superannuation wealth is invested in stocks.
“For example, people that retired and withdrew funds during the global financial crisis at the bottom of the market in 2008 had less wealth than if they’d retired in 2007.
“For this reason, it’s beneficial if people can accommodate flexibility with their retirement age.”
2. How much will retirement cost?
The Age Pension alone (as of October 2018, the maximum basic rate is $834.40 for a single person per fortnight or $629 each for a couple living together) isn’t enough to fund most people’s retirement goals, which is why superannuation and other income streams (such as investments) are so important.
“The Association of Superannuation Funds of Australia (ASFA) recommends [approximately] $60,000 a year for a couple for a comfortable lifestyle or $40,000 a year for a modest lifestyle,” Dr West says.
Heaps of retirement and superannuation calculators abound, and these tools can provide great insights into 1) how much you’ll need to retire to live the lifestyle you want, and 2) when you might be able to hang up the work boots. ASIC’s Moneysmart retirement planner, for example, will help you crunch the big numbers to visualise how retirement might look for your household.
"The Association of Superannuation Funds of Australia (ASFA) recommends [approximately] $60,000 a year for a couple for a comfortable lifestyle or $40,000 a year for a modest lifestyle.”
3. What do I want my retirement to look like?
What does the perfect retirement look like to you? Perhaps it’s overseas travel, caravanning around Australia or simply spending quality time at home with the grandkids.
It’s important to map your post-retirement goals and allocate dollar figures to them (which Industry SuperFunds’ Retirement Needs Calculator can help with) to see if your income is going to cut it.
It’s better to overestimate expenses to avoid surprises than to underestimate. If it looks like you’re going to fall short, it might be time to make lifestyle and spending habit changes, or focus on allocating more funds towards retirement. Which leads us to question four…
4. How can I grow my retirement income?
If using the above calculators has set off alarm bells, don’t worry, it’s never too late to start maximising your retirement funds.
For some, this might mean facing facts and realising you may need to work a little longer than you’d envisaged.
Making use of the Government’s transition to retirement provisions to ease gradually out of full-time work is one way to do so.
Dr West says other considerations include transitioning to work that’s easier on the body to allow you to work longer (e.g. for tradespeople), and reskilling to maintain job mobility.
“Early planning to keep working longer, if necessary, may alleviate financial stress and make savings last longer,” she says.
You can maximise your nest egg via superannuation, by consolidating multiple super accounts into one low-fee account and make extra contributions to save on tax (e.g. via salary sacrifice).
Are your kids no longer kids? Consider downsizing the house (and/or selling the second car) and investing the residual funds, or at least ask the kids to contribute more to the household bills if they’re still at home (good luck!).
“Early planning to keep working longer, if necessary, may alleviate financial stress and make savings last longer...”
Don’t forget to consider how caring for your own parents might impact your finances. Early conversations with them and your siblings can help avoid major financial bombshells.
One of the simplest ways to take control of your finances, however, is old-fashioned budgeting – looking at where you’re currently spending money to see where you can cut back. ASIC’s Moneysmart budget planner is a handy tool as well.
Exercising regularly improves your muscle strength and endurance, bone density, balance, flexibility and mental health, saving you money...
5. How can I live a happy and healthy life?
Finances aside, the most important question in your fifties is – how can I stay healthy? There’s no point smashing financial goals if you won’t be around to enjoy the fruits.
Rates of overweight and obesity increase with age in Australia, with almost four-in-five men and two-in-three women aged 45 years and over being overweight or obese. Equally as startling, only around one in 10 Australians over 50 exercises enough to gain any cardiovascular benefit.
Exercising regularly improves your muscle strength and endurance, bone density, balance, flexibility and mental health, saving you money by reducing your risk of chronic disease and ensuring you can do the things you enjoy most (like spending time with your family) for decades to come.
This article was first published by The Daily Telegraph on 29 January 2019. The information referred to may change from the date of publication and care should be taken when relying on such information.
*The above material, whilst correct at the time of publication may include references or statements which are no longer current.