I'm in My 60s
The Homestretch: Financial Planning in Your 60s
Most of us will retire at some point in our 60s. Something that’s not often considered is that, at this point, most of our major decisions are made for a lifetime. In our younger days, we could move house or quit a job knowing that we could change or reverse that decision later. Now, however, change is harder to undo. (For example, once you start drawing Social Security, it's very difficult to stop.) So this decade’s decisions—everything from your physical health to liability insurance—need to be made with that much more care.
- Health and Lifestyle - If you didn't finish with life's major expenses in your 50s—raising kids, college, weddings, and your mortgage—you very likely will now. And you're also probably still at the height of your earning power. That's a plus. Now, why should you keep yourself in the best health possible? There are too many reasons to list. Your risk for cancer and other serious conditions increases with age. Annual physicals—for both men and women—are not optional. Neither are regular colorectal screenings. Women should have mammograms regularly and should inquire about bone-density screenings. Men need prostate exams.
- Planning Your Retirement - Time to execute your plan!
Will you work? Perhaps you’re a “people person,” and you look forward to the morning water-cooler chats. Or perhaps you find work fulfilling. Or—a situation that’s increasingly familiar—you realize that you’ll simply need to keep working for a while longer, to build up (or rebuild) your nest egg. Spouses should be sure to discuss these matters in as much detail as possible.
When will you retire? Starting Social Security early packs a financial double-whammy: You'll no longer be earning money, and your Social Security and/or pension benefits will be lower. You also may lose your corporate benefits, including health coverage, which is discussed below.
How much will it cost? Think in more detail about what your retirement expenses will be. Keep in mind that they generally change over time. Your mortgage and work-related expenses will likely decrease; your health costs will likely increase. In general, retirement expenses are usually high at first (even with Medicare), lower in the middle, then higher later if health declines.
Next, identify your sources of income for retirement and do some realistic calculations about how much each will contribute. How much will your current savings, investments, and Social Security benefits be worth when you retire, and how long will they last? What effect will inflation have on your nest egg?
If you have difficulty with these calculations, be sure to consult with a qualified independent advisor.
Saving for Your Retirement - f you haven’t already, now might be a good time to consolidate the dormant accounts into a single, well-balanced, well-managed IRA. Before you do this, we recommend speaking with a qualified independent advisor, since taxes and penalties could apply if these rollovers aren't done properly. If you haven’t really started saving for retirement, or if you’ve ended up with less than you’d imagined, you’re likely in 'catch-up' mode. Luckily, the IRS has instituted rules to help:
- 401(k) Plans - In 2018, you can contribute up to $24,500 to a 401(k) plan, which includes a $6,000 catch-up limit.
- IRA (including traditional IRAs and Roth IRAs) - In 2018, you can contribute up to $6,500, which includes a catch-up limit of $1,000, to a traditional or Roth IRA.
- Estate Planning - In your 60s, it’s absolutely essential that you cross the t’s and dot the i’s in your estate plan.
- Insurance - Make sure you have the right kinds and enough of it to protect your loved ones.
- Medical Insurance - When you turn 65, you're covered by Medicare. If you're planning on retiring before then, you'll need to be sure that you have adequate medical coverage. Options include:
- Your company's retiree medical coverage
- Your spouse's workplace plan
- COBRA and/or HIPAA continuation coverage
- A private plan (although these are expensive and difficult to purchase)
- Long-Term Care Insurance - Like many things in this article, LTC falls into the category of “if you haven’t done it yet, now’s the time.” But every situation is different, so it’s best to consult with a qualified independent advisor about plans and insurers.
- Life Insurance - If your kids are grown and financially independent, the mortgage is paid off and your spouse would survive without your income, you may no longer need life insurance. On the other hand, if any of these are a concern, you may need to keep a policy in place-or even purchase additional insurance. Another exception is if you've got an estate of more than $2 million. Life insurance could help to pay future estate taxes.
- Long-Term Care Insurance - If your kids are grown and financially independent, the mortgage is paid off and your spouse would survive without your income, you may no longer need life insurance. On the other hand, if any of these are a concern, you may need to keep a policy in place-or even purchase additional insurance. Another exception is if you've got an estate of more than $11.2 million. Life insurance could help to pay the 40% tax estate taxes on any amount over the $11.2 million exemption.
- Homeowners and Liability Insurance - Throughout our lives, our homes are typically our largest asset. In retirement, a home can remain a cornerstone of your financial stability. So protect it now, with sufficient homeowner's insurance. In addition, make sure you have adequate liability insurance. Raise the liability limits on your homeowners and auto insurance policies to the maximum, and consider adding a personal liability policy (also called an umbrella policy). In general, maintain liability coverage equal to one to two times your net worth.