Saving for retirement when you’re in your 60s
Whether you’re looking forward to your last day of work or absolutely love what you do and aren’t in any hurry to retire, your 60s is a critical time to be thinking about retirement and financial freedom in concrete terms.
Hopefully, you’ve been saving for retirement for many years. If not, you can certainly begin building your retirement savings, but it is very likely you will have to adjust your retirement date and your expectations for your future lifestyle. Either way, your 60s are a time to focus on your retirement game plan.
Take a detailed inventory of your anticipated retirement situation
Just like in retirement planning in your 40s and your 50s, your retirement planning process should begin with a detailed inventory of your current financial situation. There is a distinct advantage to taking a financial inventory in your 60s – your reduced time to retirement makes projecting the future state of your assets much easier. This inventory should be as accurate as possible. We will want to look at all your potential retirement assets and run a variety of scenarios to answer questions like, “When should I begin taking my Social Security benefits?”
We will also review your insurance situation. Do you have life insurance or long-term care insurance? If you have life insurance, is it a term or whole life policy with a cash value? At this stage in life, many people no longer need life insurance. However, if you’re married and you and your spouse rely on each other’s income for support, you might want to continue life insurance coverage. Life insurance will provide a replacement income if one spouse dies and the other now has to rely on only one Social Security benefit instead of two. In that situation, the surviving spouse ends up with less income, but expenses will not be cut in half. Insurance can fill that gap.
Finally, we will want to take an estate planning inventory. It is important to have the right documents in place and financial goals for your estate situation. Do you want to leave money to your children or to charity? Do your estate planning documents provide distribution instructions that will help your family avoid probate? We will review these documents in detail with you because it is not unusual for your wishes to change over time. Even a will drafted as recently as 5 years ago might need to be updated. You will also want to ensure you have a trustee, power of attorney, and a living will or last wishes document.
Project your expenses
Because you’re in your 60s, you’ve probably started to think about your health and the costs of health care a lot more. That’s good, because if you’re not careful, medical costs can catch you off guard. If you plan to retire before age 65, you will need a plan to maintain your health care coverage until Medicare kicks in. Can you get a retiree medical plan through your former employer, obtain coverage through a spouse’s plan, or will you need to purchase private health insurance? Do you have a health savings account? We will also want to look at different plans for a Medicare supplement to get estimates of the monthly costs for your options.
You will also want to think about your day to day living expenses. Consider the lifestyle you desire and its associated costs. If you’re planning to travel, your expenses will be higher than if you plan to spend time volunteering. Will you maintain one home, or do you plan to become a snowbird? Our goal at this point is to create realistic estimates for your living expenses so you understand what is possible and where you might need to adjust your expectations.
Don’t forget about occasional expenses. At this point, you might own your home free and clear, but you will want to consider occasional home repair costs such as furnace replacement, a new roof, or other major expenses that are related to home ownership. If you’re driving an older car, be sure to estimate repair or replacement costs.
In addition, think about your charitable giving plans. There are a variety of tax-advantaged ways that you can continue to support your favorite charitable organizations, but you will need to plan ahead to ensure you can take advantage of these strategies. If continued charitable donations just aren’t in the cards during retirement, consider volunteering.
Finally, work towards reducing your debt. There might be times when debt makes sense post-retirement, but in general your goal should be to be debt free by the time you retire. Removing debt from the equation will reduce stress when the earnings on your investments fluctuate during your retirement years.
Beyond your financial situation
As financial advisors, our focus is comprehensive financial planning, of which investments is an important, but small part. We know that life is about a lot more than just money. Plan to take care of yourself. Find ways to stay active and get exercise. We’re not physicians, but after working with many clients who are well into their retirement years, we can certainly report that the retirees who stay active and get exercise live longer and more fulfilling lives than the ones who don’t.
Retirement is the reward for a lifetime of hard work. By planning carefully during your last few working years, you can set yourself up for a much more secure and comfortable future.