How to save for retirement in your 50s
For many people, your 50s are your golden years, a time when you may be at the pinnacle of your career and some of the big expenses you needed in your 20s, 30s and 40s have levelled out. But, while it may be easy to slip into a comfortable pattern of splurging on yourself and your children, this is the final stretch towards reaching your financial goals – a time when you should be maximising your financial know-how.
Shift your mindset to your saving goals
You might have a regular income now (in fact, statistics say you’re likely to be earning your highest income between the ages 45 and 51). But how will your life change when you retire, and your finances are potentially reduced or more sporadic? What happens when you need to prioritise saving overspending?
An important tip for saving for your retirement in your 50s is to change your mindset early and focus on what’s essential, rather than nice. Now is the time to prioritise your needs over your wants so you can reach your savings goals.
The first step is to use a retirement calculator to help get an idea of how much you’re likely to need.
Hold your nerve
If you’re like many Aussies, your retirement savings and other investments might have been hit by the effects of the coronavirus pandemic.
You may, however, need to re-evaluate some of your retirement plans and consider pushing back your retirement by a few years if you can.
Transition to retirement
Still keen to exit the workforce sooner rather than later? Another option to consider is transition to retirement, a stepped pathway into full retirement that lets you access some of your super funds while you’re still working.
This scheme is open to those aged between 55 and 60 who are still working and comes with a range of options that could help you leave full-time employment behind.
Aim to be debt-free
Your focus for the next decade should be on how you can enter retirement with as little debt as possible. The average mortgage in Australia is $384,7003, according to the Australian Bureau of Statistics.
Imagine if you were able to retire without having to make monthly repayments on sizable amounts like this? There are numerous strategies for shrinking your mortgage fast, from setting up offset accounts to making lump-sum repayments.
Don’t forget other, smaller debts as well. While your home loan likely comes with an interest rate of between 2.5% and 5%, credit cards and personal loans often have much higher interest rates attached to them. The sooner you get rid of this debt, the sooner you can channel money into your retirement finances to help you build a comfortable retirement income.
Teach your kids to be independent
A recent report found that more than five million Australians provide support to their adult children, and now is certainly a time that many parents will be thinking about it. If your children were among the 3.1 million people who withdrew money under the early super access scheme and you’re in a position to be able to help, consider working out a way that you can help them to repay the money over the coming months.