What to consider when planning for retirement in your 60s.
SERVING THE ST. LOUIS REGION
At 60, most people are nearing the end of their careers, with retirement on the horizon. Retirement is an opportunity to reclaim independence, nurture connections with loved ones, and pursue long-awaited aspirations. Despite years of careful saving, entering your 60s prompts a shift towards serious preparations for retirement: where is your cash flow coming from, and what do you need to do to ensure it lasts?
One of the biggest expenses and most unpredictable variables in retirement is healthcare. Medicare eligibility typically begins at 65, yet if you retire earlier, it’s important to explore health insurance options that will carry you through until you qualify. It’s also key to factor in the type of plan you’ll need, the cost of the plan you select, and determine how to generate income from your investments to address any potential health insurance gaps.
You may discover that the current accounts won’t provide the desired income you’d like in your retirement. Consider:
By taking these steps early, you can better prepare for a seamless transition into retirement confidently and avoid surprises.
It’s risky to assume you have enough saved. Before retiring, evaluate whether your portfolio can support your long-term needs and goals. Work with a professional who can provide a second opinion based on their experience and market-related portfolio analysis tools for peace of mind.
After comprehensively reviewing your assets and assessing your portfolio for the long term, it becomes easier to envision how your retirement savings will translate into retirement income.
If you learn that your income doesn’t align with the retirement you have envisioned, planning early allows you the opportunity to consider your options:
By taking these steps early, you can better prepare for a seamless transition into retirement confidently and avoid surprises
Just like in your 50s, you can continue making catch-up contributions to your 401(k) and traditional IRA. Greater contributions result in a fiscally sound financial future. Try to max out these limits or get as close as possible, especially if you’re behind on retirement savings.
A traditional IRA also offers a catch-up option that could be beneficial to building your retirement savings. However, unlike a 401(k), an IRA doesn’t provide an employer match, but it does allow certain exceptions, such as the ability to withdraw early without the 10% early withdrawal penalty. You must have earned income to contribute to a retirement account.
Social Security provides a source of income when you retire and may also provide benefits for your legal dependents after death. This taxable benefit is based on your 35 highest-earning years and factors in marital and employment status to determine its payout.
Since Social Security could potentially help fund your other government expenses like a Medicare Part B plan, an advisor can help optimize its contribution to your long-term strategy.
Deciding when to start collecting your Social Security benefit will depend on your health and unique financial situation. Ideally, you want to wait as long as possible to receive the largest ongoing payment.
Though taxes may decrease in retirement, they don’t disappear and can significantly impact your retirement budget. Educate yourself about the types of taxes you’ll encounter in retirement, gather a general idea of how they’ll affect your benefits, and understand how they’ll factor into your financial future.
By having these conversations earlier, you’ll be better equipped for the variables that can unexpectedly pop up. For example, withdrawals from certain pre-tax retirement accounts such as a traditional IRA or your 401(k) will be subject to ordinary income tax. In some cases, these taxes can be substantial and might encompass state income tax. Missouri levies taxes on distributions from traditional retirement accounts (including Roth conversions), while Illinois does not.
With advancements in healthcare, better living standards, and healthier lifestyle choices, people are living longer. Underestimating your lifespan can significantly undermine your retirement plan. It’s essential to have realistic expectations regarding your life expectancy. This ensures that your retirement strategy aligns with your long-term objectives and helps prevent you from falling short of your retirement goals.
When accumulating assets, it’s common for individuals to exceed their comfort level with risk. Adopting a conservative approach and establishing realistic expectations is key to achieving comfortable earnings, rather than taking unnecessary risks. This proactive strategy ensures financial stability and peace of mind throughout your investment journey.
As retirement approaches, it’s common to overlook how Social Security benefits are calculated. Many mistakenly assume that the amount they see at age 60 is what they’ll receive when they start to collect. However, Social Security bases benefits on the top 35 highest-income years, most significantly including the seven years leading up to retirement, which often yields the highest earnings. Consequently, many tend to overestimate their benefits.
Seeking advice from a financial advisor can provide a more precise estimate of what you’ll receive between ages 62 and 70, facilitating better financial planning.
Recognizing the influence of inflation on expenses during retirement is crucial but often overlooked. For instance, someone spending $60,000 annually now may need over $200,000 in their nineties due to inflation. While some acknowledge inflation, many underestimate its long-term ramifications, resulting in unrealistic financial projection
At Toberman Becker, we’re dedicated to helping our clients confidently transition from their careers into retirement. We anticipate the challenges you may encounter, enabling you to enjoy the retirement you worked so hard for.
Book a call today to pave a smooth road for your journey to retirement.
If you have questions about your finances or want to validate your retirement readiness, reviewing your portfolio and investments is always a good idea.
At Toberman Becker, we’re dedicated to helping our clients confidently transition from their careers into retirement. We anticipate the challenges you may encounter, enabling you to enjoy the retirement you worked so hard for.
Book a call today to pave a smooth road for your journey to retirement.
“When implementing any long-term financial and tax planning strategy (e.g., Roth conversions), always consider its impact on your total lifetime tax savings.”
MICHAEL BECKER, PARTNER
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