Financial Moves To Make In Your 60s and Beyond
We’ve come to the final installment in our five-part series on financial moves to make at each decade of adult life. In previous blog posts, we looked at what moves to make in your 20s, 30s, 40s, and 50s. Those likely don’t apply to you at this age, but they may have value for younger family members, friends, or acquaintances, so please share them if you know someone who could benefit from the advice.
This final post looks at the matters that apply to those ages 60 and above. But remember: financial planning never really stops. You’ll want to keep an eye on your investments and get help as needed to protect the wealth you’ve accumulated and help others who may benefit from your lifetime of wise decision-making.
Delay Taking Social Security
Technically, you can claim Social Security payments as early as age 62, but most experts would urge you to wait until later. You can’t collect the “full” payment until age 66 or 67 (depending on when you were born) and by age 70, you’re eligible for the most you can receive. That amounts to a significant pay raise in the monthly amounts you’ll collect not only at age 70 but the rest of your life.
There are justifications for taking the payments before 70, namely that you need the money or are in such poor health that you don’t expect to live long enough to benefit from the higher monthly amounts. Some fear that the Social Security program is in such shaky ground itself that it won’t live much longer itself, but Congress has a long history of protecting Social Security and recently authorized higher payments, so we wouldn’t worry about that.
Examine Your Medicare Options
Medicare is a valuable healthcare benefit, but a confusing one. There are time limits each year on when you can enroll, and you don’t want to miss the deadlines. Therefore, we recommend doing the research on what Medicare plans make sense for you long before the enrollment season begins.
One complication you may encounter is caused by enrolling in Medicare, then dropping it because you have taken a job that provides healthcare options. Once you leave that job, you’ll have to reapply for Medicare within seven months or be without health insurance for at least several months. Stay on top of the rules and deadlines so you aren’t exposed to significant medical costs that you have to fund out of your own pocket.
Revisit Your Portfolio – Again
You might have maintained an aggressive portfolio heavily weighted toward stocks in your 40s and 50s, but in your 60s it may be time to lock in some of those gains. After all, you’re reaching the point in your life when you’ll soon rely on your retirement funds to cover much of your daily expenses. A sudden market crash might wipe out much of your savings when you’re counting on them.
That’s why many financial plans shift toward more conservative investments as you age – bonds, primarily – so you aren’t as exposed to significant risk. You’ll still want some equities in your holdings to give yourself more growth opportunities, but not at the levels that were reasonable when you had a longer timeline before needing to cash in. In your 70s and beyond, you’ll still want to re-examine your portfolio. We recommend an annual review to be certain nothing has been overlooked or if new additions/subtractions are in order.
Revise Your Will and Make a Legacy Plan
Ideally, at this stage in your life you have accumulated a significant amount of wealth and can now think about how you want to pass it on. Your will is the primary instrument for doing that, but you can refine your contributions through charitable giving to benefit an organization or cause you care about. This is a complex area that requires assistance from knowledgeable estate-planning attorneys. However, many charitable institutions have staff members who are well-versed in how the law allows you to help their organizations through the right gift-giving mechanisms. You may wish to contact them first, then discuss the matter with your lawyer.
Manage Your Required Minimum Distributions (RMDs) From Retirement Plans
Once you reach a certain age, the federal government requires you to start withdrawing money from your tax-deferred retirement accounts, such as a traditional IRA or 401(k). The amount you have to withdraw is governed by tables that estimate your life expectancy, the idea being that you would take out proportionate amounts each year to sustain you for all the time you have left. Each year that you take an RMD means you incur taxes on the amount withdrawn.
Until recently, the year that one reached age 70.5 was the one that first required a taxpayer to take an RMD. Congressional legislation modified that so that now a taxpayer can avoid the forced withdrawals until age 72, 73, 74, or 75 depending on what year they were born.
Additionally, Congress has made permanent a provision to allow taxpayers to consider certain charitable contributions as part of their RMD requirements. (Previously, lawmakers would wait until the end of the year to decide whether to allow charitable contributions to count against RMDs.)
The value of a Roth IRA – the retirement account that imposed the tax in the year the contribution was made – becomes evident in the face of RMDs. If you’ve accumulated a sizeable portion of Roth IRA savings by age 72, you can withdraw them as needed and not pay taxes on them. Ideally, a good balance of amounts in traditional IRAs and Roth IRAs will allow you to tap into your savings as needed without incurring too high of a tax payment each year.
Enjoy Yourself
We hope that you haven’t delayed enjoying the fruits of your labors until now, but if you have, now’s the time to do so. Some people in their 60s and 70s have been so focused on their careers and providing for others that they have not thought much about spending their savings on themselves. Many of today’s older Americans are in far better health than their parents and can take on activities that might have been unthinkable for earlier generations. Retirement doesn’t have to mean spending days in a recliner or playing shuffleboard in the Florida sun. It can mean going on long-distance bike tours, learning to scuba dive, or go on photography expeditions to exotic locales.
If you’ve planned well and taken the steps we’ve advised here, you should be in good shape – financially, at least – to do whatever you want in your 70s, 80s, even 90s. Of course, should you want to discuss your options in depth with us along the way, we’re happy to set up a time to do so.
Lake Road Advisors, a Fee-Only, independent financial planning firm with offices in Corning, NY, Ithaca, NY and Portland, OR works with clients virtually all across the country. Paul Sydlansky, the founder of Lake Road Advisors LLC, has worked in the financial services industry for 20+ years. Prior to founding Lake Road Advisors, Paul worked at Morgan Stanley in Manhattan for 13 years. While at Morgan Stanley, Paul was a senior-level manager within the Institutional Equities Department. In 2018 he was named to Investopedia’s Top 100 Financial Advisors list. Paul received a Bachelor’s degree in Economics from Marist College and holds an MBA from New York University Leonard N. Stern School of Business. Paul is a CERTIFIED FINANCIAL PLANNER™ and a member of the National Association of Personal Financial Advisors (NAPFA) and the XY Planning Network (XYPN).
