8 Tips To Mastering Retirement In Your 60s
8 Tips To Mastering Retirement In Your 60s
As you approach your 60s, retirement is on the horizon. According to the Social Security Administration, the average claiming age for men was 64.7 and 64.6 for women as of 2018. While this does not indicate retirement age, it is a fair proxy. Preparing for retirement is exciting but often fraught with uncertainty. Ensuring you are financially prepared for this new chapter in your life is crucial. To help you navigate this important phase, we have compiled eight tips to help you effectively plan and make a smooth transition to retirement in your 60s.
1) Optimize Your Social Security Benefits
One of the key considerations in your financial planning is optimizing your Social Security benefits. While you can start collecting benefits as early as age 62, waiting until your full retirement age or even later is often advisable. By delaying your benefits, you can receive a higher monthly payout. Each year you wait beyond your full retirement age, your benefit increases by 8%. Monthly benefit payments can significantly affect your retirement income and help cover essential expenses like housing and healthcare.
2) Understand How Medicare Works
Medicare is a complex federal health insurance program for individuals aged 65 and older. It consists of four parts: Part A (hospital insurance), Part B (medical insurance), Part C (Medicare Advantage), and Part D (prescription drug coverage).
Understanding the basics of the program before you turn 65 will ensure a smooth transition into Medicare. Pay close attention to enrollment periods and deadlines. Disabled individuals who received Social Security benefits for at least four months before turning 65 will typically be automatically enrolled in Medicare Parts A and B. However, if you're not automatically enrolled, you have a seven-month window around your 65th birthday to sign up for Medicare. Failure to complete enrollment deadlines can result in penalties and delayed coverage.
3) Examine Tax Implications, Especially With Your Retirement Accounts
Income from sources such as Social Security benefits, distributions from retirement accounts, pensions, and investment income may be subject to taxes. The amount of taxes you'll pay will depend on various factors, including your location and income level.
It's important to be aware of any state taxes on Social Security benefits, as this can impact your overall retirement income. Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah and Vermont tax Social Security benefits, while others do not. Consider this factor when deciding where to live during retirement to maximize your income.
4) Finalize Your Vision For Retirement
As you approach retirement, take the time to envision and plan for your ideal retirement lifestyle. Consider where you and your spouse want to live, whether it's downsizing, relocating to a different area, or staying in your current home. Renting before buying in a new location can provide valuable insights into whether it's the right fit for you.
Additionally, think about how you want to spend your time in retirement. Identify activities that bring you joy and fulfillment, whether it's pursuing hobbies, volunteering, or spending time with loved ones. Having a clear vision for your retirement will help you set goals and make financial decisions that align with your aspirations.
5) Review And Adjust Your Investment Portfolio
In your 60s, it's important to review and possibly adjust your investment portfolio to align with your retirement goals and risk tolerance. Work with a financial advisor to evaluate your portfolio's performance, diversify your investments, and ensure that it can sustain your desired lifestyle throughout retirement.
Consider adjusting the risk level of your investments as you approach retirement. A financial advisor can help you navigate these decisions and optimize your portfolio for long-term growth and income.
6) Evaluate Your Insurance Coverage
Insurance is a crucial component of your financial plan, especially as you near retirement. Evaluate your insurance coverage, including health insurance, life insurance, and long-term care insurance. Ensure that you have adequate coverage to protect yourself and your loved ones in the event of unexpected medical expenses or other unforeseen circumstances.
Consider the pros and cons of long-term care insurance, which can help cover the costs of assisted living or nursing home care if needed in the future. Long-term care expenses can be significant and can quickly deplete your retirement savings, however, the premiums for long-term care policies are typically quite high. Carefully evaluate your situation before deciding whether purchasing an expensive policy is better than self-insuring against this risk.
7) Create A Comprehensive Budget
As you transition into retirement, it's essential to create a comprehensive budget that reflects your projected income and expenses. Calculate your expected retirement income from various sources, including Social Security, pensions, retirement accounts, and other investments. Then, estimate your expenses, taking into account basic living costs, healthcare expenses, travel, hobbies, and any other discretionary spending.
By creating a detailed budget, you can identify areas where you may need to adjust your spending or make additional savings to ensure a comfortable retirement. Regularly review and update your budget as your circumstances change.
8) Seek Professional Financial Advice
Navigating the complexities of financial planning in your 60s can be overwhelming. Consider seeking financial advice from a CFP® professional
or a trusted advisor with expertise in retirement planning. A financial advisor can provide personalized guidance, help you optimize your retirement strategy, and address any concerns or questions you may have.
For over two decades, the fiduciary financial planners at Hurlow Wealth Management Group have assisted clients with retirement planning. If you'd like assistance as you navigate this process, schedule an introductory call today.
Remember, financial planning is ongoing, and your needs and goals may evolve over time as will economic conditions and tax laws. By staying proactive and regularly reviewing your plan, you can make adjustments as needed to ensure a secure and fulfilling retirement.
Source: https://www.ssa.gov/policy/docs/program-explainers/benefit-claiming-age.pdf
