Peak Earners (Age 45-55) - What Should They Consider?
These are your peak earning years, your wealth accumulates but significant expenditure such as mortgage repayments and education expenses may remain. This is also the time that you should start planning for pre-retirement. Below are some key financial planning points that you should talk to your financial adviser about:
Accelerate mortgage repayments – if you have the financial capacity to do so, then paying off your debt (especially non-deductible debt such as home mortgage) whilst you are still working can take away your stress and worry of having to fund mortgage repayments after you have retired and not earning an income.
Saving for retirement – if your budget allows, you should think about super-charging your wealth accumulation and take additional steps to save up for retirement. For example, salary sacrifice into superannuation contributions and making personal deductible contributions are some of the ways to boost your superannuation balance and it may even be tax effective to do so. You can also make additional contributions into superannuation in the form of after-tax contributions. However, check with an expert first to ensure that you understand the rules and limitations regarding contributions under Australian law, as well as various superannuation tax concessions that you may not be aware of.
SMSF – if you have a large enough pool of funds (say, at least $500,000), you have the time and you wish to take control of how your superannuation money should be managed, you can work with your financial adviser to determine whether a self-managed superannuation fund (SMSF) is suitable in your circumstances.
Tax planning – ask your financial adviser about other tax effective investment structures that may be appropriate for you (such as a family trust). Your adviser can liaise with your lawyer and accountant to help set up these structures and implement the desired investment portfolio for you.
Insurance – don’t forget to review your insurance arrangement periodically with your adviser, especially if your personal circumstances (such as your income, debt, health or personal relationships) have changed. For example, if you have recently become a part time worker, your existing policy may need to be adjusted so that you are not over-insured and you are only paying a premium that is commensurate with the benefit that the insurer is obliged to pay in the event of a claim. Not only would regular review ensure that your insurance remains relevant to your situation, it may even save you money, especially with premiums increasing as your age increases.
GENERAL ADVICE WARNING: The above is general advice only and does not take into account your personal circumstances or objectives. You should seek your own independent financial and tax advice to ascertain whether and how the above applies to your particular situation and whether it is likely to meet your objectives, prior to making any financial and investment decisions.