Five Tips to Help You Afford Retirement at 50
The dream of every adult worker is retirement – the day we can finally clock out for the last time, say goodbye to the stresses and troubles of the labour force, and spend the rest of our lives doing the things we’ve always dreamed of doing.
A 2016-17 study by the Australian Bureau of Statistics found that 4.9 million individuals in the labour force were aged 45 years and over. Of this group, nearly 164,000 had intentions to retire between the ages of 45 and 59. The vast majority of the group either didn’t know when they’d retire or felt their retirement would not come until they reached at least age 65.
For many, the prospect of retiring by age 50 seems like nothing more than a dream. The cost of simply living day-to-day without being employed in the labour force is enough to keep people working well past age 50, but with the right planning, preparation, savings habits and attitude, retiring by 50 can be an attainable goal.
Check out these five tips to help you afford retirement at 50:
TIP 1: Start Early
No matter how old you are, it’s never too early to start thinking about and preparing for retirement. The sooner you get started, the sooner you’ll start growing your nest egg to have everything in order, ready to retire. If you start early enough, you may even be able to afford retirement before age 50!
TIP 2: Determine Your Cost of Living
Spend some time reviewing your current finances and financial situation. Where are you spending too much when you could feasibly spend less, and increase your savings? You can also create a rough estimate of your future cost of living per year, based on the essentials – could you comfortably live off $20,000 a year, or do you need something like $50,000?
After you figure out your base estimate, determine what cuts and adjustments you can make. If you initially work out you need $60,000 a year to live, is there any way you could cut that number down to $50,000? Sure, you may have to sacrifice some creature comforts today to make this number realistic, but by doing so, you make retirement by 50 a much more attainable goal.
TIP 3: Save and Invest
The next step is to save every bit of money you can. The most basic, but important, rule in finance is to spend less than you earn. After determining how much you need to spend to live per year, calculate this amount against the amount of money you make yearly (you can also calculate this on a weekly, fortnightly or monthly basis, depending on your current pay cycle). Take this surplus and set it aside, and do not spend it under any circumstances.
Saving this money is an excellent step, but leaving this money sitting around is probably not the best course of action. Instead, put your money to work making even more money.
Putting this money in a regular savings account isn’t the worst idea, but it may also not be the best either. Consult with an investment professional or study up on investments yourself, and put together an investment portfolio that aims to build an optimal amount of wealth over time. You should also understand the tax implications of your investment approach and the potential benefits of saving through superannuation.
TIP 4: Limit (or Avoid) Debt
One of the greatest obstacles to a comfortable early retirement is debt. During your time as part of the labour force, do everything you can to limit your debts. While some debt is fairly unavoidable (such as borrowing to purchase a home or vehicle), always consider the long-term implications of your borrowing, and the effects this debt will have on your retirement goals.
Do you absolutely need to borrow $60,000 for a brand-new car, or can you settle for something cheaper but reliable? Limiting, or avoiding, debt where possible means you won’t have to pay interest and work extra to make your payments, making early retirement a more realistic goal.
TIP 5: Downsize
You’ve already estimated your current and future cost of living, but you shouldn’t leave those estimates where they stand. Determine what changes you can make to cut your cost of living, increase your savings and investments, and prepare for an earlier retirement. For example, mortgages and rent payments make up the majority of most peoples’ expenses: Is it possible to downsize your home to spend less on these payments?
Retiring at or before age 50 doesn’t have to be just a dream. With the right planning and motivation, early retirement can be your reality! For help with your superannuation savings, contact Nationwide Super today.