How to plan for ‘easy living’ in your 50’s 60’s and 70’s. It’s easier than you think!
- Financial Planning
We all know that every stage of our lives presents particular financial planning issues and priorities. As we start to prepare for retirement or enter our retirement years, the planning challenges become increasingly acute. The reality is the decisions we make can have profound effects on our future lifestyle and peace of mind.
Sometimes it feels like it is all too hard. However, with the right advice it really can be easy sailing. Here is a snapshot of the key financial issues that we all need to focus on in our 50’s, 60’s and 70’s.
Our 50’s: the perfect time to prepare and set up for retirement
Perhaps more than any other age, our 50’s can present a multitude of changes in our personal, family and financial lives.
- The expense burden of raising children may now be tapering off as they become more independent or leave home.
- You may finally be getting on top of your mortgage and income may be getting to its peak, with a greater proportion of discretionary funds available to spend or invest.
- Health issues may start to be a growing concern so it is time to invest in yourself, exercise regularly and stay on top of health checks.
- Inheritances may be getting passed on to you as the next generation up from you are passing on.
- You may be considering down-sizing your home to make life simpler.
- You may want to scale down your work one or two days a week or take long service leave.
Among all these potential upheavals, the promise of retirement looms with its opportunities of travel, recreation and relaxation, as well as the concerns of how you will organise your finances to best cope with it and enjoy it.
One thing is for sure – there are some financial planning opportunities in this decade to easily take advantage of for future benefits.
Your thoughts will gradually be turning to what age you will take the step into retirement. With that in mind why not take a serious look at what superannuation benefits you have accumulated and work out whether boosting contributions is necessary to achieve your goals.
A key factor to be aware of is the attainment of your ‘preservation age’. This is the age at which you may be able to access benefits from your super. As at 1 July 2015, the earliest possible preservation age is 56, but depending on your date of birth, your preservation age may be up to age 60.
While you can’t get full access to your super funds until you actually retire, there are significant tax saving opportunities available via a Transition to Retirement strategy, which involves gaining partial access to your super monies. This can enable you to either scale down work commitments or accelerate your super growth, without any change in your ‘take home pay’. Getting the right advice on this issue can make thousands of dollars difference to your net position.
Your 50’s are also a time to revisit the mix of investments you have inside and outside super, to ensure the asset class proportions and risk profiles are correctly set.
In terms of dependants, the change in dynamics of children leaving home and becoming more financially independent may mean a revision of life and disability insurances are in order. While the liabilities of earlier times may be reducing, the risks of illness may be increasing, so there is still a critical need to keep insurances at a sufficient level to disaster-proof your situation.
Our 60’s: making the leap into an exciting new phase of life
The latest Australian Bureau of Statistics reports on retirement ages tell us that by far the most popular age group for retirement is 65–69 and 63% of this age group moved into retirement.
This coincides with the median outright homeownership age which according The National Centre for Social and Economic Modelling is now 66, (up from 59 in 1988/89). Retirement is when income generally switches from being earned by your labour to being earned from your super funds and investments. Your preservation age would have been reached and as long as you have met a condition of release and have officially retired you are able to access your super tax free.
You may also become eligible for the age pension in this decade of your life – currently the trigger for this is at age 65, although this may increase to age 67, depending on your date of birth. All of these aspects signal a wave of decisions that need to be made on investing your money, drawing an income from that money and how you will spend that income.
There may also be a stronger urge to downsize your home or even consider moving into a retirement village, which adds another layer to your financial decisions. More than ever, this is a time when some professional guidance can really help you gain a clear direction.
It’s also a time when the reality of planning your estate comes into sharper focus. Deciding how your accumulated assets will be passed on to beneficiaries can be more complicated than you think, so some professional help can also be vital to relieving stress in this area. This includes delegating legal and medical authority for your future care through instruments such as power of attorney and enduring guardianship.
Our 70’s: Keeping it simple and focus on fun!
By the time we reach our 70’s an estimated 84% of us are retired. The key goal in this stage should be to enjoy the life you have worked so hard to achieve. With the right planning and advice, you will ideally have your income and investments well set and will be maximising your social security benefits so that you are, for the most part, free from financial worries.
The greatest issue affecting your lifestyle may be your health. Of course more Australians are living longer and enjoying good health later in life than ever before, but mobility and ease of living may ultimately dictate changes in your living arrangements.
While many prefer the familiarity and independence of their own home, others will find the option of a retirement village a very attractive one. Further into our ageing the potential need for higher level care in a nursing home may be needed. In both of these cases there are some significant financial issues in relation to sale of home and financial arrangements for the cost of care that need to be carefully addressed.
The key to making such changes as smooth as possible is to make arrangements well in advance. There is less stress and more advantage to be gained if decisions about future care are made before such moves become a necessity. This extends to arranging your estate planning and delegation of legal and medical authority, if this has not already been dealt with.
The secret to keeping life simple is to get the right advice on all these issues sooner rather than later so you can focus on spending time with family and friends, travel and finally having time to pursue your passions.
How do you feel about making the transition from work to retirement? Join the conversation below.