As you embark on your 60s, it’s a time of beginnings and endings. On the one hand, you’re likely saying goodbye to work life and many of the associations you have there. On the other hand, you’re starting a bold new adventure as retirement begins and you take on new experiences.
While there are many things to look forward to in your 60s, it’s also a time of continued preparation, as you make sure the investments you’ve made will continue to provide the returns you need to support your lifestyle for years to come.
Why Your 60s are Critical to Retirement Planning
The first 5 years of your retired life will determine much of the pattern for the years to follow. For instance, those who are able to maintain consistent spending habits during this time may enjoy a financially healthier retirement than those who are unable to do so. Those who fail to maintain their budgets, can expect a 50% reduction in spending later in life.
To ensure that you are building wealth to support your lifestyle, it’s important to check in on your retirement savings as you enter your 60s. Talk with your financial advisor about your dreams and goals for the next years of life, how you plan to live, and how much you have saved. A professional can help determine the likelihood for reaching your goals and help you devise a catch-up plan if you are falling short.
It's also time to consider how you will handle important aspects of your life, such as healthcare expenses. While you will be eligible for Medicare at age 65, this federal government insurance program offers hospital insurance (Part A) and medical insurance (Part B) coverage. To cover certain other expenses and services, such as vision and dental, among others, you may need to purchase a supplemental policy.
There is a charge for Medicare as well. If you receive Social Security benefits, it is important to understand how much your coverage will cost, since Part B premiums are deducted directly from your Social Security payments. If you’re a high wage earner, you may also be required to pay an income-related monthly adjustment amount above and beyond your premium cost.
Taxes are another important element to consider at this stage of life. Unless your overall annual income reaches a certain amount, retirement plans such as a 401(k) or traditional IRA utilize pre-tax dollars for investing. That means you will be required to pay taxes on these earnings as you withdraw them to fund your retirement. Taxes are determined by your income bracket in the year you receive a distribution.
If your 401(k) distributions, combined with Social Security, bump you into a higher tax bracket, you could end up paying more in taxes than you need to. These are all important items worth discussing with your financial advisor.
It’s Time to Consider What Happens After Your Passing
While in your earlier years you probably gave little thought as to what would happen to your wealth after you pass. However, it’s now time to start considering estate planning and putting instruments in place to ensure your wishes are known and respected after you pass away.
At a minimum, consider granting power of attorney to someone you trust to handle your affairs if you should become incapacitated. It’s also a good time to record your end of life wishes in a living will.
Many will also want to leave a portion of their wealth to charity, either in annual contributions or in full after their passing. If details like these aren’t recorded in a legal document, your heirs may not know your wishes, and your funds could end up going to other sources. It’s important that you know your purpose when planning your estate and communicate those wishes to your heirs.
It’s important to also consider your digital assets when estate planning. Digital assets refer to things like social media accounts, email, credit card rewards, and travel miles, as well as files stored in cloud sites or digital works that may produce passive income. It’s important for your heirs or stewards of your estate be able to access these digital assets upon your passing and that they know your wishes surrounding them.
For more information on getting your affairs in order, you can read our blog on estate planning basics.
Enjoying Your 60s in Sound Financial Health
While in your 60s, it’s important to ensure that you have a plan for maintaining your desired lifestyle and to give thought to your later years and beyond.
For more financial management tips while in your 60s, visit FNBO’s financial journey page for more guidance and to receive a personalized assessment of your current finances.