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Retirement planning in your 50s: four smart moves to make

Edward Sheldon, CFA
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While it’s possible to get away with not prioritising retirement planning in your 30s and 40s, it’s a different story in your 50s. All of a sudden, retirement is right around the corner, meaning it’s crucial to give your retirement finances some serious thought. With that in mind, here’s a look at four fundamental retirement planning moves to make in your 50s.

Do the calculations

One of the most important things to do in your 50s, if you haven’t done it already, is work out how much money you need to retire. This is not particularly straightforward as there are many variables to consider including your life expectancy, your retirement income requirements, expected investment returns, tax rates, and whether you qualify for the State Pension. Retirement calculators can be useful to a degree here, however, be aware that they tend to be based on assumptions. As such, it could be sensible to speak to an expert if you’re looking for tailored advice.

Once you have determined how much money you’ll need to retire, you can then analyse whether you’re on track to achieve your goals. You can do this by looking at how much money you have saved for retirement now, and projecting this into the future.

Boost your savings

At this stage of the process, many people realise that their savings are a little on the low side. For example, a recent study by SunLife found that those aged 55 and over in the UK felt they needed an extra £184,484 on top of their current retirement savings to retire comfortably. That’s a worrying statistic. However, if you’re in this position, don’t despair. There’s still time to boost your savings.

One of the best ways to save for retirement is to save money in a Self-Invested Personal Pension (SIPP) account. The advantage of this type of account is that your contributions will be topped up by the government. For example, if you’re a basic-rate taxpayer and you contribute £800 into a SIPP, the government will add in another £200 for you. Saving into a Stocks and Shares ISA is another good option. With this type of account, all your capital gains and income generated will be tax free.

Pay down debt

It also makes sense to pay down as much debt as possible in your 50s. This includes mortgage debt and credit card debt. You don’t want to be carrying this into retirement. If you can pay this off early on, it could help you boost your pension savings. According to research from Hargreaves Lansdown, paying off your mortgage at age 50 and redirecting the average monthly mortgage payment of £633 into a pension could potentially provide an extra £218,548 in retirement.

Optimise your asset allocation

In your 50s, it’s also essential to make sure that your asset allocation is suitable for your risk tolerance. With retirement not far off, you don’t want to be taking large risks with your money. However, at the same time, holding all your money in cash savings probably isn’t the best idea either as you want your money to grow faster than inflation. Again, if you’re unsure about this, it could be sensible to speak to an expert.

Finally, don’t forget to review your progress regularly. The more often you do this, the more in control of the situation you’ll feel.

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Edward Sheldon owns shares in Hargreaves Lansdown. The Motley Fool UK has recommended Hargreaves Lansdown. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2019