It’s Not Too Late: Planning for Retirement in Your Fifties

If you are in your 50s, retirement is looming. However, if you haven't saved anything yet, you may be more worried than excited. Luckily, you still have time to prepare for retirement. Here is what you need to do:

1. Don't despair about starting late

Most retirement preparation advice focuses heavily on how advantageous it is to start saving in your 20s or even your 30s, and reading this advice can become overwhelming if you are in your 50s with little to no savings. In spite of that fact, there is no need to despair.

For most people, the 50s are their prime earnings years. They are at the top of their game professionally, and in many cases, their kids have left home, helping to free up some extra money. Let these facts bolster your confidence level.

Saving now is not fruitless. According to one interest calculator, if you save $310 per month from the time you are 50 until you are 65, you will have $83,515 by the time you are 65 – that is based on a 5 percent interest rate and interest that compounds monthly. Essentially, that is an extra $5,000 every month for about 17 years or until you reach 82.

These figures just serve to give you an idea of the possibilities. They don't take into account any interest you will earn on the money after retiring, and they don't take into account tax benefits of increasing your savings.

2. Avoid aggressive, high-risk stocks

When you are over the age of 50, you do not want aggressive or high-risk stocks. If they do well, these boom or bust stocks could garner you a lot of money quickly, but this close to retirement, it is not a gamble you should take. You simply don't have the time to weather market crashes and make your losses back.

For that reason, you want to steer clear of individual stocks and funnel as much money into a superannuation fund as you can. Currently, the yearly maximum contribution is $25,000, and you should contribute as close to that amount as possible.

The money you contribute to your super fund is only taxed at 15 percent, significantly less than the 45 percent you would pay in taxes if you took the money as income. Once you withdraw the funds from your super after retirement, you don't have to worry about paying any taxes on it.

3. Address your debts

At this point in your life, saving money is not enough, especially if you are losing money every month in high interest payments on debts. A financial advisor can help you address your debts, and figure out the best strategy to deal with them.

If you have high-interest mortgage or credit card loans, you may want to refinance them to lower your monthly outgoing bills. In other cases, if you have an unwieldy amount of debt, you may want to declare bankruptcy – that absolves your debts but allows you to keep your home and car.

4. Identify retirement earnings sources

Once you retire, you can draw money from your superfund or savings account, but if you haven't contributed enough to it over the years, you may want to plan for some other ways to earn money during retirement.

You may be able to continue your job on a part-time basis, or you may be able to turn your hobby (dog walking, furniture making, antique buying and selling, babysitting, gardening, etc.) into a part-time business.

If you own a home, you could get a reverse mortgage to help you through your retirement. Essentially, a reverse mortgage is where the bank sends you money every month, as it slowly buys your home from you, but under the terms of these mortgages, you get to stay in your home for as long as you live. If the bank has not finished paying you the agreed upon sum by your death, your heirs inherit the rest of your home's value.

Contact an independent financial adviser for more tips on preparing for retirement in your 50s.