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.