Ten Things to do by your 50th birthday

Our retirement years are often the happiest.  So where should you be by the age of 50 if these years are to be the best of your life? 

Here are ten milestones to measure your progress:

1. Have your mortgage repaid.  The next 15 years should be your highest earning, thus offering the best chance to make financial progress.  You should not waste this opportunity with loan payments on lifestyle assets soaking up your surpluses.  Repaying your home loan is a great investment.  It is risk-free.  Today a home loan will cost in the region of 6%, so to earn the equivalent from investing at a 33% tax rate would require a gross return of nearly 9%.  Any investment that returns 9% has risk.
2. Calculate what income you would like in retirement.  A rough guide is that you will spend as much as you were just prior to retirement, in the first phase. Much less once you move into the ‘sedentary phase’ of retirement.  Understand how much capital you will need on the day of retirement, and therefore how much you will need to save.
3. Invest wisely to be sure you have the capital at retirement.  Carefully develop an understanding of your investment options and choose a strategy you understand, and have confidence in. It is crucial that your investments deliver the capital you need in retirement. This is not a time to gamble.
4. Make sure you enjoy your work.  This is the last chance to change jobs, and being happy at work is good for your health and relationships.  If you don’t like your work environment and want something more meaningful, look around.  Skilled labour is scarce and that is unlikely to change quickly.
5. Exercise.  The benefits of exercise are well documented and establishing good habits in your 50’s leads onto better health outcomes in your 60’s and 70’s.  It’s not the last chance to do this but time horizons are narrowing!
6. Eat well and manage stress.  The benefits of a wide and balanced diet are well-documented, as are the health impacts of continuous stress.  It is much harder to stay fit and keep weight within healthy bands with each passing decade of age.  Good habits now will lay the foundation for a healthy retirement.  There is no point in having enough money for retirement if you cannot enjoy it.
7. Understand your insurances.  As we become more financially independent our need for life and disability insurance decreases.  These forms of insurance are to ensure that if a health event or death occur in an untimely way, then those who depend on you and your income can manage.  As you become more financially independent the need for a cash injection decreases, while at the same time the cost of premiums increase.  Maintain the right balance with regular reviews. Medical insurance also starts to become more expensive, and it is tempting to cancel policies to save money.  This is the very time that medical insurance becomes most useful.  If it is expensive look at strategies to lower premiums, such as increasing excesses.
8. Ensure your estate planning is current and effective.  Wills and Enduring Powers of Attorney are tools that provide for others to act if you are unable to do so, either because you have lost capacity or have passed on.  The alternative is indecision, decisions that you would not have chosen, or conflict.  Almost certainly it would be expensive financially, and sometimes costly in terms of relationships.  ‘A stich in time’, as they say.
9. Invest and maintain your social networks.  Work at age 50 provides a significant proportion of your social activity.  We know that social activity has positive links to both mental and physical health. The question is how much of that social activity will cease in retirement.  Planning for this in advance by doing things such as joining service or sports clubs. Joining a club (book, bridge etc), organising regular social events, is something we often are able to find time for in our 50’s.  Developing them, before they become critical to our health, will pay dividends later.
10. Help your children become independent.  How often do we hear of people who want to retire but cannot because their children are either physically or financially dependent on them.  In short, the retirement decision is taken from them.  Teaching your children how to manage money, helping them learn good financial decision-making, allowing them to learn and grow with the intention of being able to set them free, also allows you to be free.  Helicopter parents never retire.