Many people think financial planning starts to take a back seat as you get closer to kicking back and enjoying retirement, but nothing could be further from the truth. The planning continues as you make decisions about how, where and when to retire and what will happen to your money after you’re gone. This list of 9 tips can give you an idea of the steps you need to take.
1) Continue to pay off debt and increase savings
By now, if you have children, your college expenditures are likely over and your earning potential is at a high point. Nevertheless, your 50s and 60s is still a good time to save money and reduce any remaining debt that you may have accumulated. Staying focused on these two fundamentals will help you stay financially strong for retirement.
2) Review your retirement portfolio and adjust if appropriate
As you age, a periodic review of your portfolio becomes even more important. As your situation or your goals change, you may need to adjust your portfolio to stay on track to hit your long-term targets.
3) Take advantage of catch-up provisions
At age 50, most retirement savings plans will allow you to make catch-up contributions to your Traditional or Roth IRA, 401(k), or 403(b). At 55, you’re allowed to increase your contributions to your Health Savings Account (HSA) through your employer.
4) Know your milestones
Age 59 ½ is a key financial landmark. You can access most retirement accounts, such as IRAs, 401(k)s, and 403(b)s, without a 10 percent additional tax penalty. You’ll also need to start considering when to take Social Security based on several factors (single or married, cash needs, health status etc.). If you have lost your spouse, you become eligible at age 60 to collect Social Security survivor’s benefits if your spouse was eligible and you haven’t remarried before your 60th birthday. The month following your 62nd birthday, you become eligible to collect Social Security individual or spousal benefits. The individual benefit will be about 30 percent less than the full retirement benefit, and it will be subject to the earnings limit, so earned income may reduce benefits. Of course, the longer you’re able to delay taking your benefits (up to your full retirement age) the higher your benefits will be.
5) Don’t keep health insurance on cruise control
You won’t be eligible for Medicare until the month during which you turn 65, so you’ll need to continue on your employer-sponsored health plan or search for alternative insurance if you’ve retired. After age 50 you may want to reconsider the balance between premium costs and the possible increase in health insurance usage.
6) Get help in planning your estate
Sooner or later we all need to consider how our loved ones will be taken care of after we’re gone. Your financial planner will help you design a strategy that considers life insurance, Social Security benefits for a surviving spouse, will and trusts, and much more.
7) Think about purchasing long-term care insurance
Medical costs have always been the great unknown in retirement. One way to keep anxiety low and financial confidence high is long-term care insurance. In most cases, the earlier you buy a policy, the more affordable it will be.
8) Consider a Roth conversion
The period between retirement and the start of required distributions from your retirement accounts (age 72) is a good time to think about doing a Roth Conversion. The tax cost to convert will be less and the amount of future required distributions will be lower. Before you do, however, it’s important to consult with your tax advisor to factor in the impact on social security, Medicare premiums, and other considerations.
9) Take advantage of senior discounts
Last, but not least, make sure you make the most of your age by taking advantage of those senior discounts. Believe it or not, some can kick in as early as age 50, and they can be applied to everything from retail and grocery purchases to restaurants, cell phones, and travel expenses. Every dollar counts!
As your financial plan ages with you, it’s always good to have a knowledgeable team at hand to solidify and secure your situation. We’re always here to talk whenever you need us.
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