Financial planning for over 50s

These days 50 and over is not regarded as "old". In fact, many Baby Boomers are actually looking forward to this decade of their lives. For some it's a time they've been dreaming of when the kids are off their hands allowing Mum and Dad to finally enjoy that extended holiday across Australia or around the world; or just simply doing what they want to do! They're remembering the freedom they had in their youth and yearn for an easier lifestyle.

Some in their fifties will have achieved financial independence and will be able to retire comfortably, but most in this age group will be unable to fund their desired lifestyle from their accumulated superannuation. They will need to use this decade to lay more secure financial foundations.

If you fall into this latter group, read on.

Build the nest egg

As children become independent, mortgages are paid off and earnings capacity peaks, so it may be possible to significantly increase savings. Paying out any remaining debt will assist this. High interest debt, such as credit cards, should be repaid first.

Superannuation is the most tax-effective environment in which to grow wealth. Although there are restrictions on how much can be contributed to superannuation each year, the limits are generous and the tax incentives remain significant.

Consider making or increasing salary-sacrifice (ie. pre-tax) contributions to super. If you earn less than $49,488 a year, add $1,000 of after-tax contributions, and qualify for a co-contribution from the government of up to $500.

Phase-in retirement

One way to prepare for retirement is to utilise the 'Transition to Retirement' rules. Over 55s who are still working can start drawing a superannuation pension. This may allow for reduced working hours, without reduced income. It can also fund greater salary sacrifice contributions to achieve a bigger pool of funds at retirement.

Income streams and Centrelink

Certain income streams that commenced before 20 September 2007 are eligible for a 50% exemption from the Age Pension Assets Test however the value of new income streams is fully counted under that test.

The good news is that the assets test "taper rate" (ie. the rate at which the pension reduces as assets increase) is very favourable. It means that a couple that own their home can have up to $1,145,500 of other assets and still qualify for a part age pension.

As you near this wonderful milestone and are dreaming of an easier life, contact us so we can work with you to help make it a reality.