Money in your 50s: 6 things to do before retirement sneaks up on you

Your 50s can be one of the most important decades for getting financially ready for retirement. Retirement is close enough to feel real, but usually far enough away that you still have time to make meaningful changes. 

For many people, these are also peak earning years. The mortgage may be getting smaller, children may be becoming financially independent and expenses that dominated earlier decades may be easing. 

That can create valuable breathing room. Rather than simply letting retirement arrive, your 50s are an opportunity to become more deliberate about your money and what you want the next stage of life to look like. 

Here are six areas worth considering. 

1. Review where your spare cash is going 

Being debt-free when you retire can provide greater financial flexibility. But extra mortgage repayments are only one possible use for spare cash. 

Start by looking at when your mortgage is scheduled to be repaid and consider your broader financial position. Depending on your circumstances, alternatives could include building cash reserves or contributing more to superannuation. 

Tax treatment can differ between these options. Certain concessional super contributions are generally taxed within the super system rather than being treated in the same way as salary received personally. However, contribution caps, eligibility requirements and additional taxes can apply. Money contributed to super is also generally preserved until you meet a condition of release. 

There is no single option that will be appropriate for everyone. Your mortgage interest rate, tax position, cash-flow needs, contribution limits, investment timeframe and attitude towards debt can all affect the outcome. 

2. Make your higher-income years count 

Your 50s may be among your strongest earning years, making this a useful time to review your retirement savings. 

Depending on your circumstances, options for contributing to super can include salary sacrifice and personal contributions for which you claim a tax deduction. Some people may also be eligible to use unused concessional contribution cap amounts from previous financial years. 

Eligibility conditions and limits apply. If claiming a deduction for an eligible personal contribution, you generally need to provide a valid notice of intent to your super fund and receive its acknowledgement within the required timeframe. 

Before contributing more, check the current contribution rules and consider contributions already being made on your behalf. Exceeding applicable caps can have tax consequences. 

It can also be worth reviewing what happens when a major expense disappears. When school fees finish or mortgage costs fall, for example, consciously deciding how much of that extra cash flow to spend, save or direct towards longer-term goals can help prevent it simply becoming everyday spending. 

3. Plan for retirement as a household 

If you have a partner, it can be useful to consider what retirement looks like for both of you. 

One partner may earn more or have a larger super balance. One may have spent time out of the workforce. You may also be different ages and reach important superannuation and retirement milestones at different times. 

Depending on eligibility, measures such as spouse contributions or contribution splitting may be available. These arrangements have specific rules and will not necessarily be appropriate simply because one partner has less super. 

More importantly, talk about the retirement you are working towards. 

When would you each like to stop working? Where would you like to live? What sort of lifestyle do you expect? What might it cost? Are you planning to retire together or at different times? 

Having a shared picture of retirement can make future financial decisions easier to assess. 

4. Check how your super is invested 

Knowing your super balance is important. Understanding how it is invested matters too. 

Check your latest statement or online account and identify your investment option. Look at how the portfolio is divided between growth assets, such as shares and property, and defensive assets, such as cash and fixed interest. 

Labels such as "balanced" or "growth" do not necessarily mean every fund invests in the same way. 

Reaching your 50s also does not automatically mean a particular investment approach is appropriate. Your investment timeframe may extend well beyond your retirement date, while money needed earlier may have a different timeframe. 

Investment decisions should take account of factors such as your objectives, expected retirement timing, financial circumstances and willingness and capacity to tolerate investment risk. If you are unsure whether your current option remains appropriate, consider obtaining financial advice before making changes. 

5. Review your personal insurance 

Life, total and permanent disability and income protection insurance needs can change considerably during your 50s. 

Your mortgage may be smaller, your children may be less financially dependent and your savings may have increased. On the other hand, your remaining employment income may still be important to your retirement plans. 

Premiums and policy terms can also change with age, and some types of cover may reduce or cease at particular ages. 

Review the cover you hold, what it costs, what it covers and whether it continues to meet your needs. Be careful about cancelling or reducing existing insurance without considering the consequences. Obtaining replacement cover later may involve underwriting, exclusions, different terms or higher premiums. 

6. Decide what role your home will play 

Your home is both a financial asset and the place where you live, so it can be useful to include housing in your retirement thinking. 

Ask yourself whether your current home suits the retirement you want. 

You might eventually consider moving to a smaller or more suitable property, or you may want to remain exactly where you are. If staying is the plan, think about maintenance, renovations, accessibility and other costs that could arise over the next 10 or 20 years. 

Future housing decisions can have financial, tax, social security and lifestyle implications. Rather than assuming you will eventually sell or use home equity to fund retirement, consider different possibilities as part of your longer-term planning. 

Make your 50s the decade of intention 

You don't need to have retirement completely figured out by 50 or overhaul your finances overnight. 

What matters is becoming more deliberate. 

Understand where your spare cash is going. Check when your mortgage is likely to be repaid. Review your super contributions and investments. Revisit your insurance. Talk with your partner about retirement if you have one. And start developing a realistic picture of the lifestyle you want after work. 

Ten years can pass surprisingly quickly, but it can also provide time to make a series of considered decisions. 

Retirement may have a habit of sneaking up on people. Planning ahead can help you approach it better prepared. 

Important information: Superannuation contribution caps, tax rates, eligibility requirements, government incentives, preservation rules and conditions for accessing super can change. Current rules and thresholds should be checked with official sources before being relied upon. 

General information disclaimer: This information is general in nature and has been prepared without taking into account your objectives, financial situation or needs. It is not personal financial, tax or legal advice. Before acting on this information, consider whether it is appropriate for your circumstances and consider seeking professional advice where appropriate. Tax outcomes depend on individual circumstances and tax laws can change. If considering a financial product, read the relevant Product Disclosure Statement and Target Market Determination, where applicable, before making a decision.