Retirement planning tips and strategies if you are in your 50s

Once you have estimated how much you’re likely to have at retirement, compare this with how much you think you will need to fund your planned retirement activities and lifestyle. If there’s a big difference between the two figures, you will need to take some action to bring them closer together.

A simple solution can be to add a little extra to your super account. If your expenses are lower because the mortgage is paid off or the kids have left home, consider boosting your super 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 can also reduce your annual tax bill. 

If your employer doesn’t offer salary sacrifice or you are self-employed, you can still make voluntary super contributions for which you may be able to claim a tax deduction (see Strategy 7 below).

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 while still in your 50s. But you need to have 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 (see Strategy 5 below).

There are also limited circumstances when you can access your super early.

3. Reassess your investment option

Now you’re in your 50s, you probably have a better idea of when you plan to leave the workforce and the amount of retirement savings you think 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 over the next few years until you actually retire.

It’s also the right time to start learning about retirement investing and how to create an income to cover your everyday expenses in retirement.

See if you are likely to qualify for the Age Pension, or a 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 if, for instance, you manage to pay off the mortgage and your children become financially independent.This makes it a sensible time to review whether you can reduce 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 the beneficiaries you have nominated to receive your super savings so your benefit doesn’t end up with a former partner, or a new financial dependant doesn’t miss out. Also consider making 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

As you head towards 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 the strategy that will suit your personal circumstances best and what – if any – other actions you need to implement in the final years of your working life.

It’s also a good idea to learn about the tax implications of taking your super benefit at different ages. Consider whether it’s better to wait until you’re 60 to access your savings, as most people can withdraw their super tax-free once they reach this age.

6. Seek independent financial advice

The financial side of retirement can be complex and confusing. So once you reach your 50s consider speaking to an independent financial adviser about your retirement plans if you haven’t already done so.

A good financial adviser can help you work out how much you are likely to have in retirement and whether it will be necessary to make additional contributions in the next few years to reach your retirement income goal.

An independent adviser can also explain how super withdrawals are taxed, how to set up a super pension and how to create a retirement investment strategy that will deliver a steady income stream once you have left work and aren’t receiving a regular paycheque. 

7. Make tax-deductible contributions

For various reasons, people often find they have more disposable income in their 50s, so it can make sense to boost your super with some voluntary 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’ve reached your Preservation Age and are still working, you might consider starting a transition-to-retirement (TTR) pension.

Implementing this strategy can allow you to reduce your working hours while using income from your super to maintain your current lifestyle. TTR pensions can be a great way to ease into retirement, rather than giving up work entirely.

With a TTR pension, you can also salary sacrifice some of your salary into super to save on your tax bill.

9. Check if you can make a small business contribution

If you’re planning to sell your small business prior to retirement, you may be able to reduce your capital gains tax (CGT) on the sale 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’re eligible.

10. Think about bringing your contributions forward

If you want to give your super a last-minute top up, consider making a large non-concessional (after-tax) contribution.

Under the bring-forward rules, you can use up to three years of your annual non-concessional contribution cap to boost your super account. If you’re eligible, you could contribute up to $330,000 in a single year ($110,000 x 3 years in 2022–23).