Hitting the half-century mark can be a significant milestone for many of us. It often sees the advent of a new stage of life, where the nest may be emptying, the mortgage may be shrinking, and thoughts of newfound recreational time and retirement may be stirring the imagination.
It is also an age at which some key financial planning decisions take on more significance, so that unwanted consequences can be avoided.
Damon Smith, wealth adviser from Macquarie Wealth Management, stresses the importance of getting organised once you reach your 50s.
“Longevity risk is a major issue for clients in their 50s. It’s the risk that you live longer than your money can last. I find many clients in their 50s have been concentrating on putting kids through school or paying off their home. Of course these are important goals, but once you get to 50 it is also a critical time to turn your attention to your superannuation.”
The “big ticket” question
The number one question for anyone’s retirement is “how much is enough”? To break this down, you need a clear picture of:
- what age you want to retire
- what sort of income you want in retirement to support your desired lifestyle
- what other major spending intentions you have once retired (travel, boat, motorhome)
- how much retirement capital you will need to fund it all.
If you can’t answer these questions definitively by the time you are in your 50s, then you really need to act right away.
“The answer to the question, ‘Do I have enough for retirement?’ is different for every client,” explains Smith. “[It is] based on not only how much they have saved, but also what they intend to spend. Even if you feel unprepared for retirement, there’s still time, but acting quickly is essential.”
Will you retire gradually or suddenly?
While many of us look forward to leaving work behind permanently, there are some who will prefer to continue part-time work for financial, social, or mental health reasons. Fortunately, it may well be possible to access your super and qualify for the age pension while earning income. However, understanding the rules, age limits, and exemptions is critical to making the most of your situation.
If you want to continue part-time work, a financial adviser can help you analyse your position, and structure your finances to maximise your outcomes and entitlements.
Will you downsize your home?
A large family home often becomes less practical and less affordable once you close in on retirement. Because of this, many are attracted to the idea of selling up to move into something more manageable, or even into a retirement village.
While this is a perfectly reasonable and practical step to take, you need to be careful about how it may affect your taxation, social security, and investment situation. Getting some savvy advice on this now may save a lot of stress later.
Helping your kids get established
The upheavals in home affordability and employment opportunities in recent years have seen an increased emphasis in parents helping their adult children to financially establish an independent life. This can add a new dimension to your retirement plan, as you wrestle with questions such as:
- what are the ramifications of giving your kids a loan or a cash handout to help them with a home deposit?
- what are the pros and cons of being a guarantor for their mortgage?
- is buying a property jointly with them a good idea and what are the risks?
Smith emphasises the importance of factoring in such issues into your own planning:
“Many clients want to give their kids a financial helping hand, but don’t always know the impact it can have on their own situation. It’s fine to give your offspring the help they need, but you need to be careful that you don’t put your own future security at risk. Using a financial adviser can help you weigh up the pros and cons and make balanced decisions.”
Passing things on to the next generation
Hitting your 50s can often give you a keener sense of your own mortality. In turn, this may provoke thoughts of how your estate will be passed on to your beneficiaries.
As you delve into this issue, it can quickly reveal a whole range of issues that need attention where prompt action is required. For example:
- who will make legal and medical decisions for you and your spouse if either or both of you one day become unable to make them for yourself?
- is a will alone enough to ensure that what you pass on will actually get to the beneficiaries you intend?
- do you have legal vehicles, such as testamentary trusts, set up to ensure your estate is not squandered after you have gone?
- who will your superannuation benefits be paid to, given that they are generally not covered by your will?
As Smith counsels: “A well-thought out estate plan is not just about making sure your assets are directed where you want them to go, but also about managing some major tax impacts and taking full advantage of the opportunities for planning.”
A financial adviser can help you map out the vital steps needed to get your estate plans in place and relieve you of any uncertainties.
Want to live comfortably in retirement? Talk to a Macquarie Advice Concierge today about your retirement goals. Book a callback
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