You've turned 50, now what? A to-do list to get retirement-ready

Turning 50 can be a big birthday for many people. It may also be the first time some people really start thinking about retirement planning. Whether retirement is 5, 10 or even 20 years away, it’s a life stage to not only plan for, but look forward to.

With Australians living longer and in better health than ever before1, you’ll likely be using your time to take on new challenges and do the things you’ve always wanted.

The way we save for retirement has also undergone a transformation. Up until the 1990s, most Australians relied on the Age Pension for their retirement incomes. These days, you’ll probably be relying more on superannuation and other savings.

The latest figures from the Association of Superannuation Funds of Australia (ASFA) show that the average super balance for Australians aged 50-54 is $103,613.2 Reaching the age milestone of 50 means thinking about ways to maximise that nest egg.

Things to check off your to-do list:

1. Set some goals

Having ideas about the lifestyle you want in retirement and using them as goals to work towards makes it easier to decide how much super you’ll need. Having retirement lifestyle goals can also help you choose which investment options and strategies are right for you.

Want to know the benchmark amount for what a ‘comfortable’ retirement costs? The answer could help you set your goal. Let’s go.

2. Reduce your debts

It’s a good idea to start with your non-deductible debts, such as credit cards, store cards, car loans and personal loans, and prioritise the debts that charge you the highest interest rates.

Think about making extra repayments on your home loan if possible. Keep in mind that there may be fees that apply, limits on how much you can repay, or penalties if you pay off your entire loan early.

3. Get to know your super better

Know the balance and assess the mix of different types of asset classes – for example, what proportion is invested in shares versus fixed interest. All asset classes carry their own benefits and risks.

Most super funds let you choose how your money is invested so you can adjust the investment strategy to suit your financial situation and appetite for risk. When you’re working out your tolerance for risk, there are some things to consider.

ASIC’s MoneySmart Superannuation calculator helps you work out how much super you’ll have when you retire.

It’s also important to factor in how long you expect to live. In other words, how long will your money need to last?

According to the Australian Government Actuary’s latest life tables, life expectancies at birth are 80.6 years for men and 84.1 for women – and the Australian Government Treasury’s 2015 Intergenerational report projected that they’ll soar to 95.1 years for men and 96.5 years for women over the next 40 years.

4. Consider increasing your super savings

Putting extra money into super now means there are a number of years before you retire for that money to potentially grow from compounding investment returns. Here are some things you can do to boost your super:

  • Combine your super into one account

    This way, you avoid paying multiple administration fees. The Australian Tax Office (ATO)’s SuperSeeker tool lets your check your existing super accounts, find lost super and transfer your super into the account you want.

    If you choose to switch super accounts, be mindful of exit fees, investment implications and possible impacts to your insurance arrangements. Speak to a financial planner if you’re unsure.

    Also be sure to consider any tax implications if you decide to switch super funds.

  • Take advantage of a higher concessional contribution cap

    Salary sacrificing is an arrangement with your employer where you make voluntary contributions to your super from your before tax salary. Salary sacrifice contributions are a type of concessional (before-tax) contribution. They are generally taxed at just 15% instead of your income tax rate, which can make it a tax-effective way to boost your super balance.

    There is an annual limit (currently $30,000) to concessional contributions (including your employer’s Super Guarantee (SG) contributions as well as any personal contributions for which you intend to claim a tax-deduction (if you’re eligible)) before additional tax applies. If you’re 50 or over3 any time during the 2015-16 financial year, this limit jumps from $30,000 to $35,000, meaning you can further maximise your super contributions.*

    If you’re self-employed, you may be able to claim a full tax deduction on your personal contributions, in which case they will generally be taxed at just 15% in your super fund, rather than your marginal tax rate. It’s a good idea to talk your accountant if you need more information.

Want to see more super tips for the self-employed? Let's go.

  • Make after-tax contributions

    These are generally made to your super after you’ve paid tax on them, and are also known as non-concessional contributions. Examples include contributions from your take-home pay, an inheritance or profits from your business.

    These contributions are capped at $180,000 before additional tax of up to 49% applies. However, in some circumstances you may be able to withdraw any excess contributions. If you’re under 65 years of age, you may be able to use the ‘bring forward’ rule. This is where you roll three years’ worth of after tax contributions into one, meaning you could contribute up to $540,000.*

Need to know more about the super contributions caps? Let’s go.

Want to take a closer look at ways you can increase your super? Let’s go.

5. Invest outside super

You may be able to draw an income from other investments such as dividends from shares and distributions from managed funds, interest from cash savings, or a rental income from an investment property.

It’s important to consider the tax implications of receiving an income from investments – your accountant can help you calculate what they might be. You can also find out more about investing and tax at the ATO website

The types of investments you make will depend on your financial circumstances and the level of risk you’re comfortable with at this stage of your life.

Keep in mind that if you spread your money across a range of investment types, which is a strategy known as diversification, you may reduce the risk that all your investments will underperform at the same time.

6. Review your existing investments outside super

Assess your investment portfolio’s diversification strategy and the performance of your assets. There may be some adjustments you can make to ensure your investment choices are keeping you on track to reach the lifestyle goals you’ve set for retirement.

If you’re unsure, a financial planner can help you work out an investment strategy that suits you, as well as find ways to maximise the returns on your existing investments. 

7. Factor in a contingency plan if the unexpected happens

Are you adequately prepared for the unexpected, such as a health emergency? Health, income protection, life, total and permanent disablement and trauma insurance policies can help reduce your costs in an emergency.

It’s a good idea to check the cover and premiums of your existing insurance policies to see if they suit your current circumstances. You may even find you’re paying for things you don’t need. 

Before switching policies, it’s important that you understand and seek advice on how your cover might be affected.

If you’re unsure, a financial planner can help guide you through your options. 

8. Plan your estate

Understandably, you might not like to think about planning your estate, but it’s an important part of preparing for the unexpected. It will help ensure that your assets are distributed to your beneficiaries of choice and your family’s interests are protected.

As part of your estate plan, you’ll need to:

  • Make sure your will is up to date
  • Make what’s known as a Binding Death Benefit nomination or non-lapsing death benefit nomination for your super. This requires your super fund to pay your super benefit to the dependants you’ve nominated
  • Nominate a beneficiary for the proceeds of any life insurance policies you hold outside super
  • Understand the tax implications of how your assets are distributed
  • Appoint an enduring Power of Attorney to enable financial decisions to be made on your behalf if you are no longer able to. You may wish to appoint an enduring Power of Guardianship that lets a person make decisions about where you live, your lifestyle and health care. It’s important to seek independent legal advice to make sure you understand the risks involved in handing over control of your affairs to another person.

Want to know more about what's involved in estate planning? Let's go.

9. Plan for upcoming events and milestones

What does life after your 50th hold? There may some big things coming up that you need to budget for. 

For instance, if you will be helping your children fund their study, a gap year or a wedding, how much do you need to set aside? If you’re upsizing or renovating your home, think about how you can avoid overcapitalising later in life, which means spending more on the property than what you could sell it for. If you’re taking that trip of a lifetime, you may save costs by booking ahead and shopping around for the best deals.

After all, success is all in the planning.

*Figures apply to the 2015-16 financial year.

1The Australian Government Treasury, Intergenerational Report, March 2015.

2Table 1: Mean superannuation balance 2011-12, An update on the level and distribution of retirement savings, The Association of Superannuation Funds of Australia (ASFA), March 2014, p. 7.

3A higher cap of $35,000 applies if you were aged 49 or over at 30 June 2015.

Things to know before you Can:

This document contains general advice only. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial planner before making a financial decision.

Taxation considerations are general and based on present taxation laws and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information.

While care has been taken in the preparation of this document, no liability is accepted by Commonwealth Financial Planning, ABN 65 003 900 169, AFSL 231139, its related entities, agents and employees for any loss arising from reliance on this document.