Many in their 60s are feeling good about their future. These 3 financial steps can help you make the most of this decade and the years ahead.
Is 60 the new 40? A Today show survey found that 70% of sixtysomethings felt younger than their age. However, while boomers may be as physically fit as younger colleages, they would be wise to act their age when it comes to finances.
Whether you’re just months from retirement or, like a growing number of Americans, planning to remain part of the workforce, this decade can mark a personal and professional inflection point. Making the most of your 60s and beyond means taking the right steps to ensure a financially secure future.
“This is a period of transition,” says Deena Katz, a personal financial planning professor at Texas Tech University and co-chairperson of Evensky & Katz/Foldes Financial Wealth Management. “You will be making important decisions that will affect your next stage of life.”
1. Strategize Social Security
This is when your hard work starts paying off. You can begin taking benefits as early as age 62, and as late as age 70.
- When to wait. The longer you delay drawing Social Security benefits, the greater those monthly benefits will be for the rest of your life. The difference can be substantial. If you're expecting to live a long life and can afford to postpone payments, this could be the way to go.
Let’s say you turned 62 in 2017 and were eligible for a monthly benefit of $1,300 at your “full retirement age” of around 66. If you started collecting early, at age 62, your benefit would be reduced to $964 a month. If you waited until age 70 however, your monthly benefit would be $1,698; that’s 76% more than what you would get if you started at 62.
“If you believe you're going to be living several decades into retirement, you want to wait as long as possible to collect your Social Security benefits,” says Darin Shebesta, a certified financial planner and wealth advisor at Jackson/Roskelley Wealth Advisors.
- When to claim early. Six out of 10 Americans claim benefits before their full retirement age, according to the Social Security Administration. For those facing an income shortfall or who don’t expect to live beyond their early 80s, starting benefits sooner might be the more practical choice.
Consulting a financial advisor who understands your comprehensive financial picture can help you make a good choice. “Your decision should be based on your individual situation,” Shebesta adds.
2. Review Your Retirement Expenses
You need to have a realistic idea of your future financial expenses when planning your retirement lifestyle.
- Calculate how much you expect to spend on necessities, as well as any added costs. For instance, do you plan to travel or eat out more or less often? “Many people think they will spend less in retirement, when often they end up spending the same amount because they want the same quality of life,” Katz says.
- Include health care expenses in your budget. Over their lifetimes, the average 65-year-old couple retiring today can expect to pay more than $400,000 in health care costs, including payments for Medicare supplements and dental insurance, according to a recent report from HealthView Services, which specializes in health care cost-projection software.
- Put your budget to the test. Estimate the monthly income you expect from all sources, then try to spend a year or two living as if you were retired. If you’re unable to cover your projected expenses, you may need to delay retirement and find a way to save more.
3. Update Your Estate Plan
Having an estate plan isn't enough if it isn't kept current. If you have experienced life changes, such as a divorce or marriage, you may need to amend certain documents. Here are three things to keep in mind:
- Make sure your beneficiary designations are up to date. Many types of property, such as IRAs, 401(k)s and life insurance policies, pass to specifically named beneficiaries. You need to determine who will be getting those assets.
- Consider setting up trusts. Trusts can serve multiple purposes in estate planning, including setting conditions on how your estate will be distributed after your death.
- If you haven’t established a living will, chosen a health care proxy or appointed a durable power of attorney, don’t put it off any longer. All these things must be in order to ensure that your wishes are carried out with regard to your health, belongings and finances should you be unable to make decisions on your own.
While these tasks require some time and effort, once they’re completed you can start thinking about making the most of the years ahead.
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