Turning 50 is a key milestone for many and some people may start considering when to stop working, the inheritance they want to leave and if they want to access their pension.
There is, of course, no such thing as an official retirement age anymore and many people may carry on working until much later in life.
You may also face external financial pressures.
Sign up to Money Morning
Don’t miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don’t miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Your children may be calling on the Bank of Mum and Dad for help with their own financial aims such as getting married or stepping on the property ladder.
Plus, your parents may be getting older and require long term care support.
All of this adds financial pressure at any age but is particularly important in your 50s when you may be at the top of your career and hoping to wind down soon.
“I find that a lot of self-reflection takes place when speaking with individuals and couples in their 50s,” says Graham Wells, founder of at GroWiser Financial Coaching.
“We begin to realise that time is finite, energy levels begin to wane and priorities in life change.”
But, what are the top money mistakes to avoid?
1. Getting a work/life balance
Your 50s could the ideal time to lay the foundations for more balance as you start to get older.
Wells suggests people are beginning to question the wisdom of working all the hours now in an unfulfilling job in the hope of getting their time back mid-60s when they retire.
He adds: “For some, this can be accepting a reduction in pay for working less hours, or starting a business.
“If you can work for longer doing something you love, then it reduces the pressure to accumulate money and increases the opportunity to accumulate memories. Your 50s is the decade to build gratitude and to minimise future regrets.”
2. Are you paying enough attention to your pension?
It is important to engage with your pension at any age but it becomes more crucial as you enter your 50s as you need to ensure you are on track for your retirement goals.
Check how your portfolio is performing and how much you are likely to get if you decide to access it in the coming decade or so.
This will also give you an idea of if you can afford to retire yet based on your desired lifestyle and any changes you need to make such as increasing your contributions.
“Many people are scared to look at what they have but it’s important to realise that it’s never too late to make a difference and you may even find that you have more than you realised,” says Helen Morrissey, head of retirement analysis at Hargreaves Lansdown.
“Taking the time to see what you have so far means you can put a plan in place and check in periodically to make sure you are on track.
“There are plenty of online calculators that you can use and they will also help you model the impact of boosting your contributions if you need to. It can give you much needed peace of mind to know that you’ve got a plan.”
3. Can you afford to retire?
Working fewer or more flexible hours may be appealing, especially if you have reached the peak of your career.
But you don’t want to do it at the expense of your future retirement.
Research from the Pensions and Lifetime Savings Association (PLSA) suggests people need an income of at least £43,100 per year to enjoy a “comfortable retirement.”
You will hopefully have a state pension to fund some of this but by no means the majority so other sources of wealth will be crucial.
Analysis by Quilter for MoneyWeek suggests that a single person would need a pension pot worth £459,000 to get a moderate level of income from an annuity, rising to £738,000 for a comfortable retirement.
A couple would need £515,000 to purchase an annuity for a moderate lifestyle and £929,000 for a comfortable one.
This assumes an annuity rate of 5.34% for a single person and 4.79% for a couple.
Another option is if you have a buy-to-let portfolio or ISA savings.
Your 50s are a good time to consider how you will fund your retirement as you can still give yourself a decade or more to put money away.
4. Understand the risk of accessing your pension too early
You can currently access your private pension from age 55, rising to 57 from April 2028.
Doing so can give you access to tax-free cash and income that can be used to support yourself as well as your children or parents if needed.
But there are downsides to accessing your pot too early, especially if you plan to carry on working and don’t really need the money.
Once you access your pension, the annual contribution allowance drops from £60,000 to £10,000 – known as the Money Purchase Annual Allowance.
Investment firm Fidelity also highlights that cash taken out of your pension can earn a lot less than if you stay invested, especially if you have another couple of decades in the market ahead of you.
If inflation stays at 2%, a £20,000 pot will have the same buying power as £16,407 today, not taking account of interest earned, according to Fidelity.
At 4% inflation, the same pot would effectively be worth just £13,511 in a decade.
5. Getting financial advice
Retirement isn’t the only thing you should start thinking about as you get into your 50s.
Inheritance tax (IHT) planning is also important. If you are getting pressure from your children to help with mortgage deposits or other financial support, it may be a good time to use your gifting allowances.
This can help bring down the value of your estate for IHT purposes.
A financial adviser can help with checking your retirement and inheritance planning is on track and in line with your goals.
“Make sure the provisions you have in place allow you to do want to do when you want to do it,” say Riz Malik, independent financial adviser for R3 Wealth.
“Careful planning now could mean you need to work less in your golden years.”
Morrissey warns against relying on receiving an inheritance or downsizing your property to fill a gap in your pension.
“The inheritance may not materialise and while downsizing may feel like the ideal solution you may find you make far less profit from the sale than you thought once you’ve factored in things like moving costs and stamp duty,” she says.
“You may also find that as you get older you become less inclined to up sticks and move away from a home where you have brought up family. Prioritising your pension saving can give you much needed flexibility in retirement so you don’t feel forced into making difficult decisions.”
6. Enjoy your savings
As you get older, you may face your own health issues so there are risks to waiting too long to retire as you want to be able to enjoy your golden years.
Ross Lacey, director at Fairview Financial Management, says two of the biggest misconceptions among clients in their 50s are assuming they will be happy and comfortable working until their mid-late 60s and assuming that their health and appetite to do the things they have put off doing will remain.
“For many people, it doesn’t really click that every unit of life in their 50s and 60s is very precious and it could be that magic window where if they don’t do some of that stuff now they perhaps never will.”
