This article covers the nine things you should focus on with regards to financial planning in your 50s.
Milestone birthdays usually make people think about the next phase of their life. Turning 50 is no exception and the good news is that you still have time on your side. The nine things to look at in regard to financial planning in your 50s are:
Make sure you are clear about what you want. The mistake most people make is they do things like maximise their super contributions, buy an investment property or buy bitcoin without really knowing why. Map out a plan. This should include things like what holidays you want to take; when you want to retire; how you will leave the workforce; how much you need to have saved at different times; or whether or not you leave a legacy investment for future generations.
Have a plan to be debt free before you retire. Make sure you know what your repayments need to be to achieve it. To help with this, check out the government’s Moneysmart website.
If you have a mortgage, make sure you have a competitive interest rate. Interest rates are low and if they don’t start with a 2, you should get it reviewed.
Know your household cashflow and make sure you are living within your means. This includes saving for the future. Also, if you spend $100,000 a year, you will find it difficult to reduce your spending to $60,000 when you retire.
With your savings, be clear about what your target is both in terms of amount and timing. This will help you understand whether you should invest inside or outside of super and what level of risk you need to take. Super is the most tax effective way to save, but if you plan on retiring before you can access it, then you also need savings outside of super.
Review your super to make sure you are making the right contributions (to meet your goal) and you are in the right fund. You should be in a fund that not only has low administration costs, but also allows you to invest in low cost index funds. There is one fund that we know of that allows you to have a tailored portfolio of index funds with total fees less than 0.3%. For someone on an income of $100,000 with $300,000 in their super, reducing your fees by 1.0% will boost your super at retirement by nearly 9% or $100,000.
Review your non-super investments to ensure they are on track to meet your goals and are in low fee index funds with fees of less than 0.3%. Note here that most managed funds have fees of between 2 and 3% and not surprisingly have a 75% chance of under performing the index they benchmark themselves against. An index fund with fees of 0.3% will give you returns that are 50% higher after 10 years than a managed fund with fees of 2%.
Review your personal insurance to make sure you have the right amount of insurance and it is affordable. Your premiums will increase significantly each year after you are fifty. Also if you have insurance through your super, check it is the right amount.
Review or make sure you have an estate plan, including a Will and a Power of Attorney.
Having the right financial planning in your 50s is important. The longer you leave it, the smaller the benefits will be. You can do this by yourself, or you can get professional advice. The important thing is to start.
The advantage of professional advice is we have helped others through this process. We have done the research and know the quickest path to get there.
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About the Author Phil Harvey is an independent financial adviser. In 2017 Phil set up his company Construct Wealth to help clients best manage their finances so they focus on what is important to them. He is a founding member of the Profession of Independent Financial Advisers and a tax financial adviser, registered with the Tax Practitioners Board.
General Advice Warning
This advice contains general information. It may not be suitable to you because it does not consider your personal circumstances. Phil Harvey and Construct Wealth are authorised representatives of Independent Financial Advisers Australia (AFSL 464629)