Life’s comfortable with the mortgage paid off, or close to it, kids on the way out or even gone and retirement to look forward to. While this can be a great time of your life – “me time” – there are often challenges to be faced in this decade.
Divorce among 50 to 59-year-olds is increasing in Australia. This means the assets you’ve built as a couple are now divided and your lifestyle and income requirements change. It can be a highly emotional time that takes a toll and produces long-term effects, personally as well as financially.
If you’re employed happy at 50, you’re lucky. Some have been retrenched or lost jobs, then find it very hard to find alternative employment. You have a wealth of experience and knowledge and could do the job with your hands tied, but employers want a young gun, straight out of uni as they’re cheaper and bring “fresh ideas”. Lining up at Centrelink wasn’t part of your long-term employment plan.
For some, kids leaving home can be a good thing, with less grumpiness and more space, time, and money. For others, it can be a difficult time. Those parents who dedicated their lives to ensuring the children’s needs came first sometimes find the kids’ absence creates a vacuum.
Statistics show that if you’re going to have an illness or injury that stops you working, it’s probably going to happen now. But there are preventive measures, strategies, and options that can help avoid or even eliminate life’s speed humps.
START THINKING ABOUT YOURSELF AND WHAT YOU WANT OUT OF LIFE
Ensure that the person by your side is the one who will be there through your golden years.
- HAVE A PLAN FOR THE CHILDREN
One big trap is that the kids stay…and stay. This is your time. Ensure you have the resources for the future.
- PLAN YOUR EMPLOYMENT
Will your current job be viable and fulfilling through to retirement?
- SEE A FINANCIAL ADVISER
With higher disposable income, you need qualified advice to find what you must do to achieve the retirement you want.
- SUPERANNUATION IS KEY
If you haven’t got enough to retire on, you need to focus on it. Salary sacrificing is a great way to build wealth.
REVIEW INSURANCE COVER
The likelihood of claims rises as you age, but the need for cover usually falls.
Twelve years ago at the age of 40, chartered accountant Roy Wilkinson attended a financial planning seminar and was hooked.
He immediately decided he needed a financial adviser to keep a tab on his personal finances.
Despite working as the chief financial officer at the family-run Akubra hat business, and being well-versed in accounting, Wilkinson still felt he preferred a specialist to handle his financial affairs.
So he turned to financial planner Glen Killen of Strategy Financial Consulting, who was already on Akubra’s books managing its portfolio.
“Unless you keep up-to-date with changes in the government policy and new regulations affecting super and tax, it’s difficult to be on top of the game – not when you’re working full-time with 85 employees on the payroll,” Wilkinson said.
His brief to Killen was twofold: his long-term goal was to grow the nest egg so he could retire at 60, and his short and medium-term strategy is to reduce his mortgage payments to meet the education costs of three children.
While his wife, Nerida, works as a childcare assistant, her income is spent on day-to-day living expenses. Wilkinson is the main financial provider. So they decided he would salary sacrifice up to 15 per cent of his pay into his self-managed superannuation fund ad build a portfolio of mostly industrial shares from blue-chip ASX 200 companies. They avoided more volatile mining stocks and stuck with shares that delivered consistent returns.
Wilkinson is not keen on property investment, as houses are illiquid assets with high outgoings and average returns. They are still paying off the mortgage on their four-bedroom home in Port Macquarie; “We are close to owning the house – we’re on the last stretch.”
He pays Killen $2,500 a year to manage his affairs, which is tax-deductible via the family’s SMSF.
“It’s money well-invested,” Wilkinson said. “I like Glen because he gives good service, independent advice and his fees are hourly. He is not linked to a bank or any financial products providers.”
“I consider Glen more a friend – he is very good in explaining a complex issue in a simple way.”
Wilkinson comes from a school that plans ahead: “Don’t leave things to the last minute. Start planning for your retirement and the future, as early as possible, preferably by the time you turn 40. It is always less painful if you start saving early.”
OUR PANEL’S ADVICE
You’ll be at the height of your earning capacity. A key role of your adviser is to show how much you can support your kids financially after school. If you had a plan in place since your 30s, you’re in a position to ease your foot off the pedal. Asset allocation and estate planning become key issues to review and address.
Your children may need support with tertiary fees or leaving home, so budgeting is paramount. High on your to-do list will be salary sacrifice strategies. Talk to your adviser about transiting to retirement pensions. This is also a decade when your parents might need aged care, so it’s important you understand the associated costs.
Review the bedrock plan formed 20 years ago to see if it still matches your goals. Reprioritise and effect changes based on your priorities. Retirement is now a tangible thing: will you be debt-free by then? If the kids move out, it might be time to think about downsizing and freeing up some CGT-free funds shore up your wealth creation strategy.
THE REALLY SIMPLE GUIDE TO MONEY | OCTOBER 2015
The information provided in this page is general in nature and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information with regard to your objectives, financial situation and needs. You should seek independent advice from your financial adviser before making any decisions.
AUSTRALIAN MORTGAGE AND FINANCIAL ADVISERS (AMAFA)
Phone: 07 3378 2056
Fax: 07 3378 2069