The 60’s are your home stretch before sliding into retirement (for most people anyway). Some people are playing a fast and furious catch up game with their finances to make that transition and some are coasting to the finish line thanks to 4 decades of good saving habits.
1.) Assess your financial state for retirement. Again.
You should do this at the start of each decade. If you’re behind, every spare penny you have should go right into your retirement account. No exceptions. Kids in college who need money should take out loans. You should just pay your minimum on mortgage payments. Every penny should go to your retirement account. Ideally, you should have about 8X your annual income in your retirement account by now.
2.) Check out your Social Security options.
You can start claiming Social Security at 62, but each year you wait to do so will increase the amount you receive. If you can wait till you’re 70, you’ll receive almost 75% more in each in check than if you start at 62 (granted, if you are young and just reading this to plan ahead, you may want to calculate what you need to save for retirement without including Social Security in it, since there are all sorts of predictions that it may not be around for us – maybe they’re just doomsayers, but I think it’s better to be safe than sorry).
3.) Buy long term health care.
Seriously, buy long term health care. You know all those awesome things you’ve sacrificed and done over the years to take care of your children? You buying long term health care should be at the top of that list. Unless you have a kid who is a nurse and can afford to give up her life taking care of you if, heaven forbid, you have a stroke or some other horrific, long term disease slowly killing you in your later years, you will all wish you had long term health care. If not, your family, including those kids you tried to take care of for so long, will be scrambling to find the money to take care of you. Medicare covers 20 days of nursing home care. You have a co-pay for days 21-100. After the 100th day, you’re on your own.
4.) Consider switching to part time instead of full retirement.
Speak with your employer and see if there are any part time jobs with your company, or consulting, that you could possibly do to ease the transition between having a steady paycheck to living entirely off savings. Or look for jobs you’ve always wanted to do in a different field that excite you (like Park Ranger, maybe?).
5.) Don’t forget to start taking minimum distributions from your retirement accounts.
If you have landed a second job you love or continued at the job you have and have a low cost of living, you may not have tapped into your retirement accounts much or at all. Remember that by 70 ½ you have to start taking the required minimum distributions or you will be fined 50% on the amount that should’ve been withdrawn. This will also effect your taxes since you’ll be taking higher distributions. It might be better to start taking distributions before you really need them to keep the amount you received a little lower. You should take time to research this and make a plan.
6.) Calculate what your monthly income will be in retirement and start matching your spending to those levels.
Rather than suddenly shifting into that budget mindest, if the amount you plan to live on is lower than what you make while working, you should spend the last two or three years before retirement making the switch to that budget instead of your usual one.
7.) If you’re on track with your retirement savings, but still have credit card debt or a mortgage – get rid of it.
If you’ve racked up some credit card debt or are still paying off your mortgage, but managed to keep up with your retirement savings, now is the time to pay off that debt. Get rid of the credit card payments first and then work on the mortgage. Reports say that people who go into retirement debt free are the happiest. Totally ignore this advice if you’re not already maxing out your retirement savings. That should be your first priority in this decade.
8.) Consider an annuity.
Annuities may not be the best choice for everyone, but one piece of advice I’ve read that stuck with me advised taking 20-25% of your retirement savings and converting it to an annuity around 70 to make sure you have a constant stream of income for the rest of your life. Then invest the rest of your nest egg in a way that will keep up with inflation (because annuities do not).
9.) Check out a map and consider different living locations.
If you’ve been living in a high expense area (San Francisco, New York City, the entire state of New Jersey), you could save quite a bit of money by moving just a few hours away (say Nevada, Delaware or Pennsylvania). If you’re struggling with your retirement savings, this could boost your savings quite a bit and allow for a higher standard of living.
And for more advice (from someone who actually knows what they are talking about) about keeping your finances on track, check out Dave Chilton’s The Wealthy Barber. Don’t own it? Lucky you! I have a free raffle going on for a copy until September 30th!