When you hit your 50s, your super becomes more important to you than ever before.
As the cherished prospect of retirement looms, those entering their sixth decade begin to realise that they will not be working forever.
Anthony Rodwell-Ball, chief executive of NGS Superfund, a super fund for education and community-focused organisations, says that fifty-somethings start talking to their friends about their super more, begin to research their options and seek out professional advice.
“Work begins to be time-limited,” he told The New Daily.
“You only have about 20 years left to work – rather than 40 – and, depending where you are in your 50s, you will have more or less to work with.”
Greg Harper, general manager of advice services at building and construction-focused fund Cbus Super, says that people in their 50s have often paid off their mortgage, or have it well under control.
Maximise Your Contributions
In general, people who make voluntary contributions to their super have a much more comfortable retirement than those who rely only on the nine per cent contributed by their employer.
As you can only legally contribute a maximum of $25,000 per year into your superannuation account – this includes all sources, such as the compulsory employer contributions and any voluntary top ups – Mr Rodwell-Ball advises people over 50 to maximise their contributions “to the extent that you can afford”.
Similarly, Mr Harper recommends workers continue topping up their super with any surplus income. You’ll save on tax, because super contributions are taxed at 15 per cent. Your income, in contrast, is taxed according to the bracket you fall into, with the top tier attracting a rate of as much as 46.5 per cent per annum.
“This is a time to put in more into your account – in all likelihood, the kids are grown up, mortgage is under control and your have more money to spend,” he told The New Daily.
When you turn 55, the government also provides you with tax benefits to help you prepare for the end of your working life. For example, you have the opportunity to move your money from your regular super account into a retirement income stream such as an allocated pension account. For a start, investment earnings within your pension account are tax free. In addition, you receive a 15 per cent tax offset on any taxable income if you’re over 55. (There’s no tax on lump sums or income payments once you hit 60.)
Pay off any debt
If you have credit card debts, pay them off immediately. And if you still have a mortgage, contribute as much as you can to pay it down so as to ease any financial burden in the future.
Get some (good) advice
Good advice can be surprisingly hard to get. Mr Harper says that a qualified professional has to help “you achieve your goals and objectives, not theirs”. Make sure to tell your financial planner everything you can about your money situation so they can help devise the best financial plan.
Have an emergency stash
Although you may be better off financially than most age groups, make sure to have some money stashed away for a rainy day. Whether it is to take a well-deserved holiday, or pay for your children’s education – high school or tertiary – an accessible lump sum is always a necessary aspect of good financial planning.
“People work hard all their lives, and then they get to 50,” said Mr Harper.
“They may have their mortgage under control, have raised their kids, and may now be thinking of taking a holiday.”
Look at your investment strategy
This is a time to consider your appetite for risk. Because you don’t have as much time to rebuild your investments if there’s a market correction, your 50s are a time to consider whether a lower return on your investments is a worthy sacrifice for some peace of mind.
“You may want to choose a more defensive option, where your returns will be lower, but you are likely to save your capital,” said Mr Rodwell-Ball.
Work for as long as you can
The retirement age may be 67 – but the average life expectancy in Australia is currently 79.7 for men and 84.2 for women. Mr Harper says that at age 50, you’ll probably still have a good 30 years or so to live, and that’s a very long investment time frame.
Mr Rodwell-Ball recommends working for as long as possible, even if it is in part-time or casual employment.
“The longer you work, the less you have to draw on your superannuation,” he said.