If you are in your fifties, you are 15 years – or fewer – away from retirement age and questions like, ‘Do I have enough money saved to retire comfortably?’ are sure to cross your mind regularly. While you may not have saved ‘enough’ yet, the good news is that it is not too late to plan for a financially secure future. In the next 10 to 15 working years you can save significant amounts of money and flourish both now, and in your later years. Here are five ways you can flourish financially in your 50s:

 

1. Debt is the enemy

If you haven’t already taken steps to rid yourself of the dreaded ‘d-word’, now is the best time to do so. This is, however, is always easier said than done. It may be a good idea to get professional help and devise a fool-proof plan to pay off your debt while you still have a steady, ‘budgetable’ income. Debts to take stock of – and retire before you do – include personal loans, credit cards and vehicle loans that tend to have high interest rates.

While paying off debt seems tedious and never-ending, there is light at the end of the tunnel. The sooner you pay off your debt, the less you’ll be paying in interest. Think about all the other things you can use this money for – like investing in your future for instance.

Tip: Pay off your most expensive debt first

 

2. Enlist the help of professionals to review your portfolio

Just as your lifestyle and interests change over time, so should your investment portfolio. At this stage of your life, it is essential that you adapt your investment allocation to your risk appetite and investment horizon. While you may have been able to go for high risk, high return options in your twenties and thirties, the ideal retirement account should be a mix of equities, bonds and shorter-term cash investments.

It is advisable to seek professional help when making these changes and selecting your mix of equities and bonds. For example, should you need to access your money in one year, you don’t want to invest in a highly volatile growth share. In the same manner, it is not a good idea to sell out a share after a sharp decline in price. If you chose the share or equity portfolio wisely at the start of the investment, it is usually advisable to wait for its price to correct before selling. Therefore, it is best to leave these choices for investments with a longer term view.

That said, while many opt for low-risk investments when approaching retirement age, that may also not be the best strategy. A competent and professional financial advisor will be able to advise you on the kind of asset allocation model that is right for you. This allocation should be reassessed at least twice a year, which can keep the risk profile in check and possibly bolster returns.

Tip: In volatile markets, check your investment statements monthly and rebalance if necessary.

 

3. Keep up investment contributions and increase them if you can

Data from government and other sources show that 68% of South African consumers regard saving as a secondary expense, with 26% admitting to cut the expense without hesitation. If you’re among this group, we suggest you consider a change in priorities and start to pay yourself first.

If you miss one payment towards your investment or retirement plan, it is hard to catch up and ultimately keep up in the long run. These payments should always take priority when budgeting for the month and, when possible, it is always a good idea to pay a little extra in.

You could also get the advantage of some tax benefits, for example, the contributions to retirement annuities which are tax deductible. The numbers can be staggering if you consider this calculation:

  • If you earn R750 000 per year at the age of 51 – it puts you in the 41% tax bracket. With no contributions to a retirement annuity, your tax liability would be R213 431.
  • However, if you contribute R202 500 to a retirement annu­­ity, your taxable income is R547 500 and because retirement annuity contributions are tax deductible, you will only pay R83 700 in tax.
  • This means R129 731 of your contributions are government sponsored.

Tip: Once you reach your tax threshold, consider other options as RA’s have benefits and limitations You can read more about tax-free savings accounts vs retirement annuities

 

4. Scale down when the kids leave the nest

In addition to not needing the same amount of space you did when raising a family, there is a cost associated to maintaining the extra room you don’t use. Additionally, the extra capital you could raise by downscaling could potentially be the difference between semi-retirement and full retirement, comfortable retirement and a struggle to make ends meet.

Plus, a smaller place requires less maintenance meaning you’ll have more time – and money – to do the things that make retirement worthwhile (like golfing, spoiling grandchildren and maybe even a holiday or two).

Tip: Have a contingency plan should your children need financial assistance

 

5. Reward yourself but leave room for fun

After at least thirty years of hard work behind you, you deserve to have some fun with your hard-earned money – whether this is to take the overseas trip of your dreams, moving closer to the ocean or even a smaller, but just as amazing reward.

You are heading to a time in your life when you are going to have an extra 40 hours of free time per week. Retirement is your reward for all your efforts that went into getting you safely and hopefully sanely to retirement – but right now, you still have some work – and financial planning – to do.

Tip: You may be able to earn or supplement your income with a hobby or passion.