Turning 55 isn’t all bad. During our 50′s our earning capacity is often greater as experience has paid off with that long deserved promotion. Expenses generally decrease as well as children finish school and the mortgage reduces or is even paid off. The typical budget of someone in their 50′s is therefore often very different from someone in their 30′s or 40′s.
The main changes are:
Children’s Schooling – as children finish school, this can often save the family budget on average of $15,000 per year.
Mortgage repayments – the typical mortgage repayment is around $24,000 per year ($2,000 per month). Whilst not everyone will have paid their mortgage off by the time they reach 55, for many the end is in sight.
Travel – this is an expense that might actually increase as you get older. With children becoming increasingly dependent, parents find that they have the time and inclination to travel. An average spend in this department tends to be $7,500 per year, representing an overseas trip every 2-3 years and a few shorter domestic trips in between.
After taking into account the above changes, the typical couple in their 50′s can reduce their overall expenses by around $30,000 per year.
The differences in a typical household budget for a family in their 30’s and 40’s (left) compared to a family in their 50’s and 60’s (right). On average 30% of the family income can becomes disposable income and can be put towards topping up superannuation contributions, investments and savings before retiring over the next 5 – 10 years.
How can you take advantage of these changes to your budget?
Getting from where you are now to where you need to be to retire is about discipline, planning, strategy and above all, finding the right ‘balance of life’. A good financial adviser will be able to provide valuable input to all of these things as well as helping you set goals and remain focused.
Written by Michael Hogue.
Dallas Davison, Michael Hogue and Ali Hogue.