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- 1. Review and boost your retirement savings
- 2. Check when you can access your super savings
- 3. Reassess your investment option
- 4. Review your insurance cover and beneficiaries
- 5. Consider how and when you want to receive your super benefit
- 6. Consider getting independent financial advice
- 7. Make tax-deductible contributions
- 8. Consider a transition-to-retirement strategy
- 9. Check if you can make a small business contribution
- 10. Consider bringing your contributions forward
In your 50s, you’ve turned the corner and are heading into the final stretch of your career before reaching retirement.
Now is the time to take a closer interest in your super and think about the lifestyle you would like in retirement. There’s still time left to boost your super account if necessary and to review the way your super is invested to ensure you reach your financial goals.
To help ensure you are on the right track, check SuperGuide’s list of useful tips and strategies for super savers in their 50s. Not all the tips suit everyone, but our list will help you identify some of the key super-related issues you need to consider.
1. Review and boost your retirement savings
Retirement may still be a few years off, but this is the time to get serious and ensure your super is in order. Now is a good time to calculate your likely nest egg at retirement and review whether you are on track to achieve it.
Once you have estimated how much you are likely to have at retirement, compare this with how much you will need to fund your planned retirement activities and lifestyle.
If your expenses are a bit lower because the mortgage is paid off or the kids have left home, now can be a good time to boost your super account by setting up a salary sacrifice arrangement with your employer if you don’t already have one. If you make extra super contributions from your pre-tax salary into your super account, you not only increase your super balance, you may also reduce your annual bill.
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2. Check when you can access your super savings
Depending on your age, you may be able to get your hands on your super savings during your 50s. But you need to have both reached your preservation age (which varies depending on your date of birth) and met a condition of release.
Once you apply to access your super benefit, you can generally choose to withdraw an amount from your super as an income stream, lump sum or a combination of the two.
3. Reassess your investment option
Now you’re in your 50s, you will have a better idea of when you are likely to leave the workforce and the amount of retirement savings you will need. That makes it a good time to reassess your current investment strategy and decide if it’s still the right one to pursue until retirement.
It is also the right time to start learning about retirement investing and to check if you are likely to qualify for the Age Pension or Commonwealth Seniors Health Card. Both these government benefits can make a real difference to how much income you need in your retirement.
4. Review your insurance cover and beneficiaries
During this decade you may find your financial commitments lessen and you become mortgage free. This makes it a sensible time to review whether you need to change the level of your insurance protection within super. Some people, of course, may find they need to increase their insurance cover because they have a new family and young children.
Divorce or separation may also mean the insurance beneficiaries you named a few years ago are now no longer appropriate. Check your nominated beneficiaries so your benefit doesn’t end up with a former partner, or a new financial dependant doesn’t miss out. Also consider a non-lapsing death benefit nomination if it’s available, as a binding nomination expires after three years if you don’t renew it.
5. Consider how and when you want to receive your super benefit
In the final sprint to retirement, it’s wise to start thinking about how you want to take your super benefit – lump sum, income stream or a combination of both. That way you can think about what strategy will suit you best and what actions you need to take in the final years of your working life.
Consider whether it’s better to wait until you are age 60 to access your savings, as most people can take their super benefit tax free once they reach this age.
6. Consider getting independent financial advice
For some people, being in their 50s means it’s a sensible time to talk to an independent financial adviser about their retirement plans.
A good financial adviser can help you work out how much you are likely to have in retirement and whether you need to make additional contributions in the next few years to reach your retirement income goal. Advisers can also explain any tax you will need to pay when you receive your super benefit and discuss how best to invest your super benefit once you have left the workforce.
7. Make tax-deductible contributions
In your 50s, you may find your income is still high, so it makes sense to boost your super account with some voluntary super contributions if you can. You may be able to claim a tax deduction for them as well, leaving you with a lower tax bill.
Tax-deductible super contributions can come from a variety of sources including your take-home pay, savings, an inheritance or the sale of an investment asset.
8. Consider a transition-to-retirement strategy
If you are aged 55 or over, consider starting a transition-to-retirement (TTR) pension, as they allow you to reduce your working hours while using income from your super to maintain your lifestyle.
You can also salary sacrifice some of your salary into super to save tax and use a TTR pension to replace some or all your lost income, even if you continue working full time.
9. Check if you can make a small business contribution
If you are planning to sell your small business prior to retirement, you may be able to reduce your capital gains tax (CGT) bill and top up your retirement nest egg at the same time. The government’s small business retirement exemption could allow you to make a significant contribution into your super account if you are eligible.
10. Consider bringing your contributions forward
If you want to give your super account a last-minute top up, consider making a large non-concessional (after-tax) contribution.
Under the bring-forward rules, you can use three years of your non?concessional contribution cap ($100,000 in 2020/21) to make a significant contribution into your super account.