Entering your 60s could mean you’re getting ready to reap your financial harvest. But, after decades of careful spending and saving, you may still be hesitant to say goodbye to full-time employment. If you’re still carrying high-interest rate debt, making a hefty mortgage payment, or wondering if you have enough money in savings, delaying retirement might be a good idea. Before you exit the workforce, reassess your finances and be prepared to reboot your retirement plan, as needed.
Here are 10 tips to help ensure you’re ready for your next financial milestone, even if you decide to continue working.
- Assess Your Readiness
Before you can determine if you have the financial strength to support a retirement lifestyle, estimate how much money you’ll need to cover your remaining years. Use the Social Security Administration’s Life Expectancy Calculator1, which shows the average number of additional years you can expect to live based on your gender and date of birth. Compare this figure with your retirement savings plus anticipated retirement income to gauge whether you’ll have enough money to last your remaining years.
- Refresh Your Budget
Living within your means is necessary regardless of your age. Calculate expected retirement expenses and income now to help set realistic expectations. Even if you no longer have a mortgage, a different expense might replace it. For example, Fidelity® estimates that a couple retiring in 2019 would need a significant amount to cover health care costs1 during retirement1. Failing to plan or budget for retirement-related costs could put you in a financial bind and lead to unnecessary stress. Reassess your budget and lifestyle expectations to allow for this and other expenses.
- Merge Your Retirement Accounts
Merging multiple retirement accounts into one account can simplify money management. Save time and stay organized by consolidating your retirement accounts. Log into one account to keep tabs on balances, adjust asset allocations, and make withdrawals. If you keep your accounts separate, you’ll need a game plan to ensure you take the required minimum distributions (RMDs) 1 from each account. Failure to take timely RMDs from each account could result in penalties. Speak with a tax professional to help determine the best order of distribution based on your account holdings. A SchoolsFirst Financial Advisor2 can help you with consolidation options.
- Lower Your Portfolio’s Risk
Asset allocation will probably need to shift to less risky investments based on your goals and retirement timeframe. For example, rebalancing your portfolio by decreasing stock holdings and shifting to more conservative investments such as bonds and money market accounts may be a way to increase cash reserves and protect potential gains as you approach retirement. A SchoolsFirst Financial Advisor2 can review your portfolio and offer additional guidance.
- Delay Your Social Security Benefits
While you can start receiving Social Security retirement benefits at age 621 doing so will reduce the amount you could have gotten by starting at a later age. The maximum monthly benefit you receive depends on several factors, one of the most significant being when you decide to claim benefits. For example, the maximum benefit you can receive based on your Retirement Age1 in 2020 varies significantly:
- Retire Early at Age 62 – $2,265
- Full Retirement Age* – $3,011
- Retire Late at Age 70 – $3,790
Delaying when you start accepting payments can help lock you into a higher lifetime payment tier. Remember that these payments may only increase by a small percentage point each year to account for increases in the cost-of-living adjustment (COLA). For example, COLA only increased by 1.6% in 2020.
*Your full retirement age is based on when you were born. Use the Social Security Administration’s Retirement Age Calculator1 to determine how receiving benefits at different ages applies to your specific situation.
- Apply for Medicare
Save on expenses when you use Medicare 1 benefits. This government program can help cover hospital, medical, and prescription drug expenses for people age 65 and older. However, you can sign up for benefits as early as three months before you turn 65. Failing to sign up for certain types of Medicare coverage when you’re first eligible could mean you’ll have to pay a late enrollment penalty1. Understanding coverage features will allow you to compare costs against other health insurance options and identify where to fill the coverage gaps. Learn more by visiting medicare.gov1.
- Purchase Long-term Care Insurance
The U.S. Department of Health & Human Services1 claims that two-thirds of today’s 65-year-olds may need long-term care support. Covering the annual costs of in-home care, assisted living, or even nursing home care can quickly drain your retirement savings. But long-term care insurance can help protect your finances. Explore your coverage options before you turn 65. The longer you wait to secure a long-term care insurance policy, the more you may have to pay in annual premiums. Get the help you need navigating through options available with a SchoolsFirst Financial Advisor2.
- Pay Off Any Lingering Debt
Paying off loans, credit cards, and other consumer debt before entering retirement allows you to direct more money toward your retirement savings. Read 5 Tips to Get Out of Debt to develop a game plan. Once your debts are paid, you can redirect those funds to support other aspects of retirement planning. If you need help with debt management, visit GreenPath Financial Wellness1 for more tips and one-on-one counseling.
- Consider Other Sources of Investment Income
Stocks and bonds aren’t the only choices for creating income throughout retirement. Annuities can create the additional cash flow you need to increase your income. Many people find the lifetime guaranteed income available with this investment product worth considering. As with other investments, review the pros and cons of retirement annuities1 before investing your money. They may not be right for everyone, but they could be right for you.
- Check Your Estate Plan
When was the last time you reviewed your estate plan? Do you have an estate plan? If you haven’t created one, now is a perfect time. Let a SchoolsFirst Financial Advisor2 help demystify estate planning. An estate plan can offer peace of mind. If you become incapacitated or die, decisions related to your health, assets, and finances will be handled according to your wishes.
Have Questions? Let us Help
Having a check-up with an expert can help you determine your savings needs. Our financial advisors provide complimentary consultations to SchoolsFirst FCU Members, and can help find creative financial strategies tailored to your specific needs. Advisors can discuss your investment needs on the phone, or you can meet with them at the branch closest to you. It’s easy to schedule an appointment.
Learn more about our financial advisors.2
- When you click on external links, you are linking to alternate websites not operated by SchoolsFirst FCU, and SchoolsFirst FCU is not responsible for the content of the alternate websites. The fact that there is a link from SchoolsFirst FCU’s website to an alternate website does not constitute endorsement of any product, service, or organization. SchoolsFirst FCU does not represent either you or the website operator if you enter into a transaction. Privacy and security policies may differ from those practiced by SchoolsFirst FCU, and you should review the alternate website’s policies. 2. Securities sold, advisory services are offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor. CBSI is under contract with SchoolsFirst FCU to make securities available to Members. Not NCUA/NCUSIF/FDIC insured, may lose value, no financial institution guarantee. Not a deposit of any financial institution.CUNA Brokerage Services, Inc. is a registered broker/dealer in all fifty states of the United States of America.
Extra Credit provides general information to help improve our Member’s financial lives. Every situation is different, so please contact us for guidance on your specific needs. The advice provided in Extra Credit is not intended to serve as a substitute for speaking to a loan representative, financial advisor, or GreenPath Financial Wellness counselor who can help tailor a solution for you.
If you post a comment, we will make every effort to respond or contact you directly. We reserve the right to delete comments that contain personal information, unauthorized content, or are generally inappropriate.