“Fifty – The Ultimate ‘F word’”
Now that you are in your 50’s, it’s likely that your children have left the nest and perhaps even have children of their own, your income and earning power is at its peak and you can now focus your energy on achieving your retirement goals.
I have outlined below my 8 top personal finance tips for your 50s. I hope you find them valuable and if you have tips of your own that you’d like to share, feel free to comment below.
1. Has Your Risk Profile Changed?
As you turn 50 or if you are already in your 50’s it can be an excellent idea to review your risk profile. This is particularly important if you have not reviewed your risk profile in some time as chances are, it will have changed. For the majority, with exceptions of course, investment risk typically sits in the Balanced to Conservative end of the investment risk spectrum. By having a clear idea of your current risk profile, you can carefully structure your investment strategy to hit your retirement goals.
2. Top Up Your Retirement Savings as Much as Possible
The time value of money and compound interest play a much smaller role in your 50’s than in your 20’s, so it is important that you top up your retirement savings to ensure that you reach your target retirement sum. In calculating your retirement needs, it is always wise to plan on having some amount of your retirement funds left at the ‘end’, even if you are a firm believer in the SKI principle (Spending Kids Inheritance). This ensures that you do not outlive your money. Review the retirement saving and investment vehicles that you have access to and start topping up to achieve your goals.
3. Work with a Fee-Based Financial Adviser
While this may sound rather self-fulfilling, now is a critically important time to start (if you are not already) working with a Fee-Based Financial Adviser. This means an Adviser whose interests are 100% aligned with yours’. This will ensure that your investment strategy is ideal for your situation and you also have a trusted professional ensuring you are in the best possible financial position to achieve your goals.
As you start getting close to retirement it is not the time to take unnecessary risks that do not suit your risk profile, so working with a professional Fee-Based Financial Adviser can add value to your own situation. Your Adviser can also review the investment options that you have available, look at the best strategies to achieve your desired retirement income and keep you on track to achieving it.
4. Are You on Track to Achieve Your Goals?
It is time to ask the tough question, “Am I actually where I need to be financially to achieve my goals?” The ostrich ‘head in the sand’ approach is not a wise strategy and it’s important that you review your situation thoroughly with an Adviser, or at the very least, individually or with your partner. If you are on track, congratulations for both setting a realistic and achievable financial plan and for sticking to it. If you find that you are not on track, review the key issues and consider potential solutions. Do you need to contribute more to your retirement savings? Does your investment strategy not match your risk profile? Are you losing too much to fees and taxes?
5. Pass on the Financial Lessons You’ve Learned to Your Children/Grandchildren
“The old believe everything; the middle-aged suspect everything; the young know everything.” – Oscar Wilde
It is an indisputable fact that time brings experience. What financial lessons have you learned in your life? This could be through formal education or simply through the ‘School of Hard Knocks’. It is a sad reality that practical financial education in our schools globally is disgracefully poor, and the small improvements that we are seeing is certainly not going to be enough for this current generation of school children to be equipped with an adequate financial education. Therefore, family can play an important role in passing on key financial information.
This could be as simple as reviewing your Will and Estate Plan with your children and explaining the importance of having this in place. It is said that the fastest way to learn is to make mistakes, however I personally believe that the fastest way is to learn from the mistakes of others and to imitate their success.
6. Review the Tax Implications of Your Current Plan
Inheritance and Estate Taxes vary between jurisdictions across the globe so it is important that you review the implications of your current retirement plan. When are you planning to retire? What are the estate and inheritance taxes in the jurisdiction? How would this impact your will and estate plan that you have put in place?
7. Are Your Assets in the Right Place?
As you get closer to retirement, it is important that you review whether your assets could be put to better use. With many tax efficient investment and retirement saving structures globally, there could be many options that you have not yet considered. Are you taking full advantage of your tax-efficient superannuation or pension accounts available? Many expatriates simply save their excess income in a bank account and with ‘rock-bottom’ interest rates globally, this can lead to nothing other than going backwards. Allow me to explain, if inflation is 2.4% (2013 rate in Singapore) and you are earning 0.15% interest on your savings, then you are effectively losing 2.25% of your spending power each year.
8. Do You Have the Right Structure in Place to Give Back?
Are you looking to donate some of your estate to charity or your favourite cause? If so, it is important that you have the right structure in place so that your wishes are not only carried out as you have stipulated, but also in the most financially efficient manner. I recommend that you speak with an experienced Adviser in setting up charitable trust structures and review your options. This can be a powerful strategy to continue making a substantial difference in the lives of others beyond your time.
Your 50’s are an important part of your financial life and the right decisions can ensure that you achieve your retirement goals.
I hope you find these 8 top personal finance tips for your 50s of value. Feel free to like, comment and share these with your network.
Have tips to add? Would love to hear from you, feel free to comment below.
Jarrad Brown is an Australian-trained and qualified Fee-Based Financial Adviser with Australian Expatriate Group of Global Financial Consultants providing specialist financial advice and portfolio management services to international and local professionals in Singapore.
Book your complimentary consultation with me here.