At 50, financial questions begin to shift from “what are my goals for the future?” to “where have my past decisions led me?” Financial adviser Tony Sandercock explains.
With a few decades already behind you, it’s time to consolidate your financial affairs and take stock of your past financial decisions. Adviser Tony Sandercock* says the conversation now shifts, “from planning for all sorts of exciting possibilities, because you’ve got time, to managing the probabilities”.Is my financial vision for the future realistic?
When it comes to planning for retirement, Tony talks about your ‘best before date’ - and it’s typically somewhere in your 50s. “If you have time to create strategies, save and invest, financial goals can be accomplished,” Tony says. “Without time, you’re stuck with a much more limited menu of options.”
People in their mid-50s often approach Tony, finally ready to get serious about retirement. They want to retire in 10 years say, with a certain standard of living attached.
“They want me to work some magic for them,” he says. “Don’t get me wrong, there are always things that can be done to improve a situation. My point is that there comes a time when the conversation changes from planning for all sorts of exciting possibilities, to managing the probabilities.”
At this point, aspirations may need to be revisited, and people need to be realistic about what can be achieved with the time and resources available.Have I paid off my mortgage?
Ideally your mortgage would be paid off, but that depends on your circumstances.
“I had kids in my mid-20s and my debts were gone by the time I was about 50,” he says. “But if you’re having kids in your mid-30s, it’s probably going to be around 60, and you’re probably not going to retire at 65, you’ll probably retire at 70.”Do I have my retirement plan in place?
The short answer should be yes - well and truly.
It comes back to these questions: where am I?, where do I want to be? and how am I going to get there?
As Tony explains, “Sometimes the goal and reality don’t match, and part of the process is to be honest with yourself. Maybe it’s time to begin to adjust your lifestyle; to say, ‘Okay, this is the way it’s going to be, I need to make some adjustments early.’ Or maybe the decision is to work longer.
“When I first started in this business, everybody wanted to retire at 55,” he says. “I never hear that anymore. One reason is, people don’t have the money and, two, it’s too young.”
For many the concept of full ‘retirement’ may actually need to be scaled back to reducing your work hours, or embarking on an encore career. With our life expectancy now 10 or 15 years longer than past generations, there are more considerations than just money.
“A job is social interaction, it’s purpose and a way to feel good about yourself, and I think maybe the ideas around retirement are different today. That’s certainly the way I view it. I hope to work forever,” Tony says.Should I salary sacrifice more into my super fund?
The rule of thumb here is, the longer your money is in your super fund, the better the return. So if you plan to increase your super payments, the sooner you do it the better, to generate more interest. “$20,000 saved over 10 years brings a much smaller return than if you had saved that same $20,000 over 30 years or more,” Tony says.
You can make super contributions to your fund until age 74; to find out what the potential benefits of additional super payments are, check out MoneySmart’s Super contributions optimiser calculator. The Retirement planner calculator might also help.Have I discussed my will with my children?
It’s one of those awkward family discussions that people tend to avoid, but if your children are adults, it’s an important one to have. You need to discuss who you’ve nominated to be your power of attorney, who will be the executor of your estate. Your kids then understand your expectations and why you have made those decisions.Do I have my insurance needs covered?
“The issue in your 50s is that insurance can get expensive, and often there are tough choices to be made,” says Tony. “You really have to weigh up how much you spend on insurance and the protection that provides versus other needs. It’s trying to find a balance, and these considerations are very individual. ”
* Tony Sandercock provides general financial information only. As a financial adviser he does not endorse any product in particular.