How Much Gearing Should You Keep in Your 50s and 60s?

You should usually start reducing gearing in your 50s and 60s unless your cashflow is very strong, your loan‑to‑value ratios (LVRs) are moderate, and your retirement income is already secure. The decision is less about age and more about four tests: repayment risk, retirement income gap, tax changes and personal risk tolerance.

This guide gives you a decision‑grade framework you can use this week to work out whether to hold, reduce, or exit property debt.

A simple framework helps you choose between keeping, reducing or exiting gearing as retirement approaches.

Step 1 – Define your “retirement window” and income gap

1.1 Know your timeline

Most Australians should treat the 10 years before retirement as their de‑gearing window.

• If you aim to stop full‑time work at 65, your key window is roughly 55–65.
• If you’re already 60+, the window is now and the next 3–7 years.

If you haven’t read it yet, pair this article with How and When to Start De‑Gearing Your Investment Property Loans for timing signals and warning signs.

1.2 Quantify your retirement income gap

You can’t decide on gearing without knowing whether you’re on track for income in retirement.

1. Estimate comfortable annual spending in retirement – say $80,000–$120,000 after tax for a couple (your number may differ).
2. Project income from super, SMSF pensions, investments and part‑time work.
3. The difference is your income gap.

If your projected secure income (super + annuities + very low‑risk assets) already covers 80–100% of your spending, keeping some gearing can be reasonable.

If there’s a large gap, you need capital growth and/or surplus cashflow, which raises the question: can your current level of debt safely deliver that?

Step 2 – Run a hard cashflow and risk stress‑test

2.1 Stress‑test repayments, not just today’s rate

In your 50s and 60s, you want to be harder on yourself than the bank. A practical rule from other parts of our hub: aim to keep total home + investment repayments at around 25–35% of net household income in this phase.

Use three scenarios:

• Current rate
• +1.5% (mild stress)
• +3.0% (serious stress – roughly the APRA buffer)

Worked example

• Investment loan: $800,000, 25 years remaining
• Current rate: 6.5% p.a., P&I
• Monthly repayment ≈ $5,400
• At 8.0% (1.5% higher), repayment ≈ $6,170
• At 9.5% (3.0% higher), repayment ≈ $7,060

If your after‑tax household income is $12,000 per month, that one loan alone is:

• 45% of income at 6.5%
• 51% at 8.0%
• 59% at 9.5%

Layer in your home loan and other debts and you can see how gearing that felt fine at 45 becomes uncomfortable or unsafe at 58.

2.2 Compare “keep gearing” vs “reduce gearing” – at a glance

If the “keep higher gearing” column makes you uncomfortable, you’ve already answered your question: start de‑gearing.

Step 3 – Factor in tax and policy changes

3.1 Negative gearing and CGT reforms change the maths

From 2026–27, Federal Budget reforms and the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026:

1. Quarantine many residential rental losses for established properties bought after 12 May 2026.
2. Replace the 50% CGT discount with CPI indexation and a 30% minimum tax on most capital gains from 1 July 2027.

That means:

• High negative gearing is less valuable as a tax strategy for new purchases.
• Holding highly geared, low‑yield properties into your 60s for the tax write‑off alone stops making sense.

You’ll see this theme reinforced in Plain‑English Gearing Basics Every Australian Property Investor Must Know and our guide for high‑income and self‑employed investors.

3.2 CGT timing vs de‑gearing

If you plan to sell to reduce debt, think about:

• How long you’ve held the property.
• Whether a sale before or after 1 July 2027 gives a better after‑tax outcome.
• Whether selling one property to clear multiple loans is cleaner than nibbling at several.

Tax shouldn’t be the only driver, but ignoring it can cost hundreds of thousands over 10–15 years. This is where having your tax, loan and structure advice coordinated really matters.

Step 4 – Decide which of three camps you’re in

4.1 Camp A – “I should keep most of my gearing”

You’re likely in this camp if:

• You have large, liquid buffers (6–12 months of all costs in offset is a sensible target).
• Even at +3% interest, total repayments stay under ~30–35% of net income.
• Your properties are strong, rentable, with decent yields.
• You enjoy work and don’t plan to fully retire until 70 or later.

Action this week:

• Tighten loan structures: split investment loans, keep home vs investment purposes separate, avoid messy cross‑collateralisation. See How to Design Flexible Investment Loan Structures for Smarter Gearing.
• Direct surplus cash into offsets so you can pivot quickly if health or work changes.

4.2 Camp B – “I should gradually reduce gearing” (most readers)

You’re here if any of these are true:

• You’re within 5–10 years of retirement.
• You feel repayments when rates move 1–2%.
• One or two properties are heavily negatively geared with no clear growth story.
• You’re self‑employed or your income is lumpy.

Practical de‑gearing moves:

• Channel bonuses and surplus cash to pay down non‑deductible home debt first, then tackle the weakest investment loans.
• Consider debt recycling while you’re still working if it fits your risk profile (see How to Use Debt Recycling and Smart Loan Structuring in Australia).
• Shorten loan terms selectively (e.g. shifting a loan from 25 to 20 years) to quietly accelerate principal reduction.

4.3 Camp C – “I need to cut gearing fast and simplify”

You may need a sharper change of direction if:

• You’re within 0–5 years of retirement and still have high LVRs (70–90%).
• You have no meaningful cash buffer.
• Your business or employment in your 50s–60s is less secure.

In this camp, the right answer is often:

• Sell one asset deliberately, rather than risk being forced to sell under pressure later.
• Use proceeds to clear all non‑deductible home debt and significantly reduce or clear at least one investment loan.
• Rebuild 3–6 months of expenses in cash before considering any new investments.

Reducing gearing in your 50s and 60s can trade some upside for much greater retirement flexibility.

Step 5 – Turn the framework into a one‑week action plan

You don’t need to solve everything this week, but you do need to get your hands on the numbers.

5.1 This week’s checklist

1. List all loans – home, investment, business – with balance, rate, repayment, remaining term and security property.
2. Run a simple +3% rate stress test on each loan.
3. Estimate your retirement spending and income gap.
4. Label each property: keep, review, or likely sell in the next 10 years.
5. Decide which camp (A, B or C) you’re in.

5.2 When to get professional help

You should get integrated advice when:

• You’re considering selling one property to de‑risk the whole portfolio.
• You’re juggling business, home and investment debt on the same securities.
• You’re unsure how the 2026–27 negative gearing and CGT reforms hit your plan.

A triple‑qualified adviser (Tax Agent + CPA + Broker) can run after‑tax, after‑interest scenarios so you’re not guessing.

FAQs

Should I aim to be completely debt‑free by retirement?

Not everyone needs to be completely debt‑free, but high, risky gearing usually should not follow you into full retirement. Modest investment debt backed by strong cashflow, long leases and good buffers can be fine. The red flags are high LVRs, low yields, short or unstable income and no clear plan for clearing or containing the debt by your mid‑60s.

Is it ever smart to increase gearing in your 50s or 60s?

It can be, but only in narrow circumstances. That might include a low‑LVR, high‑quality asset where you have very strong, stable income and a clear exit strategy. For most Australians, the combination of rate risk, tighter tax benefits and a shorter working runway means adding leverage late in the game usually raises risk more than it increases opportunity.

How do the 2026–27 tax changes affect my decision to de‑gear?

They reduce the tax upside of carrying losses on new established properties and make capital gains more heavily taxed. That tilts the balance towards sustainable, positive or neutral cashflow and moderate leverage. If your strategy relied heavily on negative gearing and the 50% CGT discount, you should review it now rather than drifting into the new rules unprepared.

Should I sell my worst property first when de‑gearing?

Often, yes – but “worst” needs definition. Consider: cashflow (after tax and all costs), growth prospects, upcoming maintenance and emotional stress. Sometimes selling one strongly performing property can still be right if it repays multiple weaker loans and transforms your overall risk. Model the whole portfolio, not just one asset in isolation.

What if I’m self‑employed and my income is lumpy?

Self‑employed pre‑retirees generally need lower gearing and larger buffers than salaried workers. Stress‑test a 30–50% drop in drawings for 3–6 months combined with higher interest rates. If the portfolio only works in the best 12 months of your business cycle, you’re probably carrying too much risk into your 50s and 60s and should favour de‑gearing.

Key takeaways

• Use your 50s and 60s as a deliberate de‑gearing window, not a time to blindly hold maximum leverage.
• Run cashflow and rate stress‑tests, then decide if you’re in keep, gradual reduce, or simplify‑fast camp.
• The 2026–27 tax reforms make sustainable cashflow and moderate LVRs more important than chasing tax losses.
• Selling one property strategically can be smarter than drifting into retirement with a risky, over‑geared portfolio.

If you want a clear, numbers‑based view of your own position, book a free 15‑minute gearing health check at /contact – one conversation that covers your tax, your loans and your retirement runway with a CPA, Tax Agent and Broker in one.

General advice only.