It’s a great time to fine tune your retirement plan
Do you break into a cold sweat when someone mentions the word “retirement”?
According to the Retirement Confidence Report, only 25% of the 1,500 Australians surveyed over 50 years old believe that they have saved enough for retirement and 38% felt some anxiety about retirement.
If you’re one of this group, don’t despair. Even if you’re close to your retirement age, it’s never too late to start saving. Rather than fear outliving your savings, take steps now to live better later.
Start with the end in mind
You need to know what you want in retirement. For some, it can be that long-awaited plan to travel around Australia, or overseas. To others, it can be as simple as spending time with family. Being able to link these to your retirement goals is the key to feeling in control.
The bottom line is that firstly you need to know your income needs, to then determine, how much capital you need to provide that income, how long your money will last, and what you can do to maintain your lifestyle in retirement.
If you are in your 50s and want a fabulous retirement, here are 7 tips for successful retirement saving on a tight timeline.
- Think twice about paying for HECS debts or money towards home deposits
Before you offer to pay your kids student loans and helping with property purchase, you need to check your financial position to ensure that you will still have sufficient savings to support you in retirement. - Eliminate your mortgage
One of your largest expense is probably your mortgage. Take aim at that bad boy and eliminate it for good. One option is to make extra payments. If the children are still living at home, get them to chip in for household expenses through boarding payments. The extra funds will help pay your home loan down faster (and will help the kids learn to budget).
Another option is to consider downsizing to a property you can pay cash for, especially if the kids have left home by now and you don’t need those extra bedrooms or living areas. With immediate effect, you’ll free up thousands of dollars you can use to build up your retirement savings. - Build up your retirement savings and reduce your income tax simultaneously
If your expenses are a bit lower because the mortgage is nearly paid off or the kids have left home, boost your superannuation balance by setting up a salary sacrifice arrangement with your employer. This involves “sacrificing” a portion of your pre-tax salary to superannuation (up to a maximum cap). This strategy increase your superannuation balance, it will also reduce your income tax bill as these contributions are not counted in your assessable income. - Review your insurance policies
As you transition to retirement, your financial commitments may be less as the mortgage will be lower and the kids may have left home. Now is a good time to review how much you really need to cover mortgage requirements and family expenses. Remember to check insurance cover held in your name as well as inside superannuation. - Find an emotional motivator to get you to take action
Any transformation starts with a goal and the persistent pursuit of it. To many pre-retirees, retirement means financial freedom. But when you really think about it, it’s really about building an impenetrable financial wall around you and your family.
For example, going to the office every single day and can’t wait to retire, then use that as your motivator to get your retirement plan into action. If you don’t have a dream, then you won’t have the focus you need to keep you going. You need to get emotional about your vision for your retirement. - Find alternative income streams
In the new economy, there’s a trend among 50+ to look past their assets and liabilities and towards their experience and years behind them. Some of the entrepreneurial ways they are using to sustain themselves include sub-dividing their property, adding a granny flat to their home, advertising spare rooms on AirBnB, and driving for Uber. Being resourceful and creative in your endeavours means you can potentially build yourself up financially without trading off your preferred lifestyle in retirement. - Get some grown-up accountability and get financial advice
If you’re on course to meet your retirement goal, that’s great! But you’d probably want to have an objective third party who will hold your feet to the fire. You need someone who cares enough about you who will make sure you’re taking retirement planning seriously. Get some professional help from a financial planner to put you ahead of the game and keep you on track.
If you’re still feeling anxiety about your retirement, remember, the most important step is getting started.
Remember, if there’s a dollar sign involved, we can help. Before you make any large decision with your money, talk to someone who thinks about these things every day. We’re here and we’re happy to help.
Handy Tools and Calculators
- To check what budget you will need in retirement, use the ASFA Retirement Tracker Calculator: http://www.superguru.com.au/ExternalFiles/calculators/retirement-tracker/#/
To help you work out what income you’re likely to have from super and the age pension when you retire, use the Retirement Planner calculator from MoneySmart: https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/retirement-planner
