Financial “To Do List” Series: Managing Money in your 60s
To retire, or to not retire, that is the question.
When it comes to retirement, the 60s are the new 50s. The traditional retirement timeframe for individuals in the past most often fell somewhere between 62 and 65 years of age. The current state of retirement has individuals working well beyond their 60s and into what was traditionally defined as the retirement years. Why are we seeing this trend? Simply put, people are living longer and in a lot of cases, individuals find that they haven’t saved enough for retirement, so they have no choice but to continue working.
Delaying Social Security
If you are in your 60s and it is clear that you have not done enough by way of saving for retirement there is still hope. Are you still in a position to work longer? If so, take advantage of setting aside more to your retirement accounts. Take advantage of catch up contributions.
Another key element of working longer is that it will afford you the ability to delay the start of your Social Security benefits. For every year a pre-retiree delays Social Security benefits, the initial amount he/she will receive increases by about 8%.
If there is a need to file for Social Security earlier, if possible, the best option is to have the spouse who is earning lesser of the two to start taking Social Security at 66 year old. Making the choice to receive Social Security benefits between the ages of 62 and 65, while still working, could reduce the benefits received. Of course everyone’s situation is different, so it is important to sit down with an advisor to look at your specific Social Security situation.
The Impact of Heath Care Costs on your Savings
The cost of health care is a large expense that many tend to overlook. Between deductibles, premiums and other expenses, your savings can take a big hit to cover health care expenses.
- A 2017 published study by the Employee Benefit Research Institute (EBRI) outlined that in order to have a 50% chance goal of covering health care expenses in retirement a 65-year-old man would need $72,000 in savings and a 65 year-old woman would need $93,000.
To have a 90% chance of having enough savings to cover health care expenses the 65 year old male would need $127,000 saved and the 65 year old female would need $143,000 saved. Those are large numbers to account for.
How is your Portfolio Allocated?
The general rule of thumb is that as you get older your overall portfolio mix should favor bonds. While that general theory is true, you also need to balance that with the fact that we are all living longer and the implication of downgrading equity exposure could go against your long term goals. Ultimately, you should be able to sleep well at night and not worry about the stock market. You have a plan and it is important not to lose sight of that plan and make irrational decisions. At this stage of your life your investment principals may seem to be much like they were when you were younger – you are not investing for the next 5 years, you are investing for the next 10, 15, 20 years.
Do you have your financial information documented?
Do your loved know where to find important information? Now is the time to get organized. Outline a road map for your loved ones to know where to find important documents. Bank/Investment Accounts, Mortgages/Home Equity Loan, Credit Cards, Insurance policies, Funeral arrangements, contact lists. It is important to have this information outlined, stored in a safe place and be sure to tell your executor or personal representative where to find it.
Unfortunately people don’t realize they have not saved enough for retirement until it is too late. It is not just your portfolio that you should be concerned about. Consider estate planning tools, executors, trusts, health care needs – there are many variables to consider and this is where the use of a financial planner can help in assessing your complete financial planning picture.
Interestingly enough, while you have worked hard to save for retirement, at this stage the financial problems that you may be facing may have nothing to do with the stock market, but have more to do with steps you have taken to round out your full financial plan. Best to get ahead of it now, so you can enjoy a stress free retirement!
- Are there ways you can earn extra income?
- Continue to build up savings
- Delay filing for Social Security benefits
- Assess your health care costs
- Revisit your asset allocation – how is your portfolio allocated?
- Organize your personal and financial matters
Contact KLR Wealth Management, LLC for more information.
Published on: 09.20.18