I’ve been tracking the life stages of retirement planning over the past two weeks: this week I look at the most active of retirement planners: people in their fifties and sixties.
This cohort can see the end of their working lives and they know they have to make some successful financial plans if they’re going to live in the style of their choosing.
They are realistic about retiring because life has grown complex: divorce, re-marriage, serious illness and kids who won’t move out of home. They all complicate the picture.
But there are basics to consider too.
Firstly, once you’re in your fifties, it’s not too late to get serious about building a nest egg. You can look at one of those calculators online and get a clear idea of how much you’ll need to live well in retirement. Get a number in your head – a target is a good thing.
Secondly, be very focused on how you’ll have a freehold home in your retirement. Whether you pay it off before you retire, or use your super to pay it out, having a mortgage-free home is a big bonus in retirement.
Thirdly, get focused on your super. Superannuation is a tax-effective way to help you save enough to retire on, especially if you put in more than the 9 percent your employer gives you.
However, super is a complex series of rules governing tax, income and the super funds. And in order to get the most out of it you’ll need professional advice.
There are many things you could do wrong and end up paying too much tax, especially if you own a business or you’re a SMSF trustee. Super is taxed on the way in, while it’s earning, and sometimes it can also be taxed on the way out.
There are taxes for extra contributions, there are tax effective ways to have insurance and there are tax rules governing where you put the money that comes from your super when you retire.
Do you know all these pitfalls? Do you know how to make the right moves and save yourself tens of thousands of dollars?
Probably not. If you’re heading towards retirement and you’re about to boost your super and really build your nest egg, I suggest you get an expert financial adviser and make sure you do this properly – even if just to stop you parking all your money in the low-risk, low yield cash accounts.
Some people may baulk at the cost of an adviser, but understand this: the cost of good advice is very small compared with the benefits.