SERIES: How to be money-wise in your 50s

Last updated on 5th December, 2018 at 02:38 pm

An exciting – if a little scary – life phase is just around the corner as retirement moves closer. Whatever your situation, these four steps will help assure your financial future.

You don’t know how you got there but you’re in your 50s heading towards retirement. An exciting – if a little scary – life phase is just around the corner. The good news is, in most cases, the kids have moved out; the bad news is you may still be paying university fees. You won’t be working for much longer and the opportunity to benefit from compound interest is fast running out. If you’ve spent the past three decades investing adequately for retirement, you’re set. Whatever your situation, follow these four steps to assure your financial future. Of course, it is always best to consult a financial planner and discuss your plans.

1 Review your retirement budget

This might seem daunting, but working out a retirement budget can be fun. For the first time, certain outgoings will go down. Employment tax, retirement savings and commuting costs will disappear. Others, like medical aid, and exciting optional extras like travel and hobbies, may go up. Include unexpected one-off expenses like painting the house. Also factor in inflation. Then look at income, pay-outs from pensions, provident funds, annuities and other investments. Does income exceed spending? If not, you’ll need to come up with a plan – either to save more or spend less in retirement. For guidance on how to achieve your goals, speak to a financial planner.

2 Make saving a priority

If you plan to retire in your 60s, this decade is your last chance to prepare. Saving is never easy and now you’re in the ‘sandwich’ generation – no longer supporting children but may be covering the care of ageing parents. And there’s still the bond (the one you’ve been accessing for the past 10 years). You must find ways to save aggressively now if you want to take any advantage of compound interest. It can be a powerful tool but only if it has two ingredients: the re-investment of your savings and time. If you haven’t been saving 15% to 20% of your income for the past 30 years, consider saving at least 40% now. Where possible, accelerate retirement contributions in any existing products.

3 Earn extra income

It’s easy to talk about saving more but that isn’t easy when your income is the same. Try to find other sources of income to boost your savings. One is to spend less. Another is to make your existing assets work for you. The best option is your property. If you have space, consider renting out a room or creating a flatlet from two rooms. Downsizing can also help release capital to invest for retirement. It’s a priority to pay off your bond. Make additional monthly payments to shorten the length of your loan – that’s one fewer item on the expenditure side of your retirement budget.

4 Pay attention to your finances

People who pay time and attention to their finances are the ones who make progress and live their retirement dreams at the end of their career. No plan is completely risk free, but building and maintaining a portfolio that is appropriate for your goals gives you the best chance of achieving them. Keep an eye on it, review it – then stick to it. Do not, under any circumstances, plunder your investments.