Retirement planning in your 50s can be much like the board game The Game of Life. To commence this classic, each player decides on whether they want to move straight into a career or begin with a good education. As each player moves around the board they are confronted with a variety of life events. Some of the events include significant one-off expenses (who could have imagined that commencing a worm farm would cost $50,000!). Other milestone moments include getting married and having up to four children (though quite possible to have more my 12 yo tells me). There are crossroad moments where you can change career. There is also the ability to go back to school to up-skill. Property and other assets are acquired along the way. The game ends when all players reach retirement and then total the value of their assets. The player with the highest levels of assets is the overall winner.
Earlier this year, I reach my very own milestone – age 50. During my earlier years I loved junior cricket which was a big part of my life. Reaching 50 runs was a great achievement for players. Upon scoring the 50, the batsman would hold his bat high into the air – looking around to the applause from the crowd. Turning 50 years old, I hold my own imaginary bat in the air. Upon hitting my half century, I reflect on all the things I have achieved over the years. Whilst these achievements are not of international cricket standard, none-the-less make me feel proud. Though at the same time I ponder the things I had not quite achieved or got back to. I loved cricket as a kid and was a handy left arm bowler. I even made it to grade cricket. Though life just got way and I never got back to playing. Likewise scuba diving, which I tried in my 20s, but never got around to finishing the course. Also gave windsurfing a go, but became a one lesson wonder. Life, work and commitments just seemed to prevent me getting back to hobbies I had an interest in. Now at age 50 I ask myself “had I done enough?”
It appears to me 50 is an age of realisation. It is an age, with careful planning, we can do all the things in life that we want to achieve.
Though I know I am not alone with my thoughts. Others reaching the same age have also questioned where the years had gone and couldn’t explain why they hadn’t got back to their younger day hobbies. They also wonder why they had not found the time for the new interests they wanted to explore. Precise time it seems had slipped away. Though many confess the availability of free time and lack of money to be the contributing factors.
Are we the winner of the Game of Life if we hold the most assets at retirement? Or are we the winner if are are able to create a reason or a purpose for that wealth?
It appears to me 50 is an age of realisation. It is an age, with careful planning, we can do all the things in life that we want to achieve. By this stage in life we may have been able to put a few dollars together and have started to build some wealth. Though have we ever stopped and asked ourselves what is the wealth for? Are we the winner of the Game of Life if we hold the most assets at retirement? Or are we the winner if are are able to create a reason or a purpose for that wealth? The purpose – to live the lifestyle and to do the things in life we want to do, rather than the things we feel we have to do! If work is our purpose, then there is no reason to change things. However, if there are other areas of life that provide greater happiness and wellbeing, then why should we not make this a bigger part of our life – and sooner! Perhaps we want to learn new skills, or reclaim old skills such as cricket or scuba diving in my instance. Perhaps we want to be able to spend more time with family, having made significant sacrifices and had missed time with the special people in our family and our social circles. Let’s face it, life is not a rehearsal and precise time can slip away.
Retirement Planning in your 50s tips
Know your leakages from your financial bucket
To achieve or even regain the lifestyle we seek, we really need to understand how much money is enough to do all these fun things, though still be able to pay the usual bills. The first step is then to create a list of all expenses. Elizabeth Warren, in her book ‘All your Worth – Your Ultimate Money Plan’ suggests you should plan your expenses into 3 buckets – 50/30/20. Bucket one is your needs. Allocate 50% of your expenses to necessary items including power, food, and other regular expenses to run a household. Next, Warren suggests allocating 30% of your expenses to wants. She suggests that unless you make tracking expenses enjoyable, then you are unlikely to keep to the plan. This bucket will include the cost of your new hobbies or interests, or the old ones you want to get back to. For instance for a scuba diver, the cost of scuba equipment would be factored in here. Finally, Warren suggests allocating 20% to savings. The savings could be contributions to retirement savings, including superannuation, managed funds or share portfolios. However, savings can also include additional repayments to pay down debt sooner. For many, the thought of paying debt sooner is creating extra money to spend on themselves.
Know your inflows
Once you understand the expenses, or the leakages we sometimes refer to, you then need to understand how much capital you will need in your financial ‘bucket’ to ensure your bucket never runs out of money. The capital will need to have the ability to fund those outflows from your bucket for a number of years. Getting the right balance of growth and defensive style assets will help here.
Understand your bucket’s biggest risk
Though there is another concern to your bucket greater than your bucket running out of money. You could have too much in your bucket. This is a problem when you are much later in retirement and have worked too long, or over saved and under lived and have not done all the things you would have liked to do whilst able to do it. A financial planner or the government website MoneySmart can then help you understand your bucket – helping you enjoy doing all the fun things in life.
For some of us we may still need a few more years to put money away for all the things we want to do. For the fortunate among us, we may already have more than enough. This could then provide the ability to help others financially – such as family or meaningful causes. Though the bigger awaking for the vast majority is the realisation that we already have enough – but just don’t know it yet!
Understanding your leakages and inflows to your bucket will enable you to better plan for that chosen lifestyle. What a great way to start life past 50 – living our desired lifestyle and having the financial resources to remove the fear of ever running out of money! That sounds like the Game of Life many people want to play and be the winner of!
Paul Turner is a Financial (Lifestyle) Planner and a big believer in life not being a rehearsal.
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