How to retire at 55

Plan ahead carefully

It’s fine to fantasise about retirement days blissfully filled with café lunches, exotic travel and hobbies – but you need the funds to back it up.

Latest figures from The Association of Superannuation Funds of Australia estimate that to live comfortably in retirement a couple needs $58,784 a year, and a single requires $42,861. To determine the amount you need over 30 years or so, be honest about the lifestyle you’re envisaging.

Do you really want to retire at 55 if it means eating baked beans and travelling no further than the local caravan park? Probably not! If your finances look grim, you may be better off working for longer to ensure more quality of life when you do retire.

Write a plan containing your goals, savings capabilities, timelines, and cash flow streams such as superannuation and investments. Read up extensively on the subject and consider consulting a financial planner.

Make sure your mortgage is paid off

Financially it’s a good idea to get rid of your mortgage – your “good debt” before retirement. Plus no-one wants to be stressed out at the bowling club, still thinking about a house. If possible, pay your mortgage fortnightly. “If you pay 26 payments per annum rather than 12, you’re getting ahead because you’re making more payments, chipping away at the interest,” says Anouska Linz from homeloans.com.au.

“People also reduce payments in line with lowering interest rates but that’s crazy. The smarter thing is to keep payments in line with higher interest rates because you never know when they’ll come back up again. Throw as much spare cash as you can at your mortgage.”

Clean up bad debts

If you’ve got bad credit card debt, you could end up working longer than the Queen. If you have multiple cards, cut up the ones with the highest interest rate and pay them down asap. Live strictly with one credit card or none at all. Get a low interest rate card and whatever you do, don’t just pay off the minimum.

If you’re royally in the red, consolidate all debts into a personal loan which generally offers better interest rates than credit cards or sign up for a debt agreement.

Save as much as you can – now

If you’re serious about retiring at 55, then there’s no easy way of saying this – stop spending money now. Save furiously then invest the extra savings to create future wealth.

Cut back on everything. Spend less on groceries, shop at cheaper stores, find economical service providers and eat at less expensive restaurants. Switch your spending to a “needs” rather than a “wants” basis. You might even be pleasantly surprised at how much lighter your life feels with less stuff and simpler choices.

Invest wisely

You’ll never retire at 55 simply by stashing cash under the bed. Consider these investment strategies:

Property: Buy an investment property – preferably positively geared in an area where prices have increased yearly. The longer you hold a property the better, so investigate this option well before 55.

Super: Make sure your fund is a good performer. Firstly check how much money you have. Assess with an advisor whether you’re happy with your super class. If your super’s barely risen, consider switching funds.

Finally, contribute more than the standard 9.5 per cent employer contribution. If you’re nowhere near 55 then if you put in an additional $50 a week, the benefits by the time they’re 55 will be significant.

Shares: Purchase shares through a trusted wealth management organisation. They can assess the level of risk you’re comfortable with and invest your money accordingly.