You’ve reached your 60s. Your hard work, saving and investing is about to pay off — you’re almost at the retirement finish line!
Before you kick back and enjoy your new adventures as a retiree, there are a few things you should do to set yourself up for financial success. You’ll also need to keep making smart money decisions so that your retirement funds last.
Here are eight pieces of advice to keep your finances healthy through your 60s and beyond.
Identify Your Exit Plan and When Withdrawals Will Start
When exactly will you say “farewell” to your workplace and “hello” to your new retirement benefits? Get prepared for this transition by identifying these target dates:
Your “End of Work” Date
The “official” retirement age for Americans lies somewhere between ages 65 and 67, which is also when individuals can start claiming social security and using Medicare. However, the best time for you to retire will depend on a variety of factors, including how much you’ve been able to put towards your retirement over the years, your health, your personal goals and your ability and desire to work. Examining your finances and picking a target year for when you want to retire can help you as you adjust your retirement contributions and build out your post-work game plan.
As for telling your employer when you’re leaving, optimal timing will vary on a case-by-case basis. Notifying your workplace too early or too late could jeopardize your plans for exiting on your own terms, or it could leave your coworkers frustrated as they scramble to find your replacement. While two-to-four weeks’ notice is the norm for leaving jobs in most circumstances, you may want to have a conversation with your boss three or six months in advance — especially if your position won’t be easy to fill. It’s also nice to offer to help train anyone who will be taking over your job duties once you retire.
Your “Withdraw From Social Security” Date
Picking when to start receiving Social Security benefits can be tricky — even the Social Security Administration says that there isn’t a “best age” to start and that it depends on your specific circumstances. Technically, you can start your Social Security benefits as early as 62.
However, delaying your benefits can pay off in the long run. Taylor Jessee, investment advisor and director of financial planning at Taylor Hoffmann Wealth Management, recommends delaying your benefits for as long as possible.
“The caveat is you’re basically stuck the rest of your life with whatever decision you make,” Jessee explained. “If you start your benefits ASAP at age 62, you will lose up to 30% of your monthly benefit forever! But on the other hand, if you delay benefits to the maximum age (70), you stand to make up to 24% to 32% more per month.”
You can learn more about Social Security, and apply for your retirement benefits when the time is right, at the Social Security Administration website.
Your “Withdraw From Retirement Fund” Date
401(k)s, Roth IRAs and pensions all have varying rules around when you can withdraw from them without penalty and when required minimum distributions kick in. For most people, it’s best to leave your funds alone until you’ve stopped working and are no longer receiving a paycheck.
When you do start withdrawing, make sure you’re doing so in a way that will make those funds last. Fidelity advises individuals to take out no more than 4-5% during their first year of retirement, and then adjusting future withdrawals annually based on the inflation rate.
Don’t forget to update your budget when you start withdrawing from your retirement fund. A well-managed budget can help you spend wisely as you adjust to your new fixed income.
Finish Strong With Retirement Savings
Since many individuals retire at the end of their 60s, the beginning of this decade is typically treated as the “last push” for retirement savings. Fidelity recommends having 8x your salary saved by age 60 and 10x your salary by age 67. If your savings aren’t on track, keep growing your nest egg by making catch-up contributions. It may also be a good idea to delay your retirement for a few years.
Additionally, shifting your funds towards a more conservative portfolio during this decade can help protect the savings that you’ve worked so hard to grow. Traditionally, protecting your portfolio pre-retirement has meant shifting towards more conservative investments, moving about half of your money towards things with more liquidity (such as bonds and cash).
“When you’re a decade-plus away from retirement, there is no risk in losing money at that time,” explained Jonathan Freeman, director of Stonebridge Financial Group. “Those are your peak savings years, and if the market goes down, you will benefit by saving on lower prices. But early on in retirement or shortly before retirement, sustaining a large loss can have a permanent impact on your lifestyle during retirement.”
Depending on your current resources and future needs, it may be beneficial to keep a bit more risk in the mix. A financial advisor can help point you in the best direction.
Use Your Work Benefits Before They’re Gone
Do you have great health, vision and dental insurance plans? Does your workplace offer matches for charitable donations, college savings accounts or emergency funds? Once you retire and are no longer an employee, these perks will disappear, so it’s important to take advantage of them while you still have time.
In terms of health-related expenses, Medicare can provide some support in retirement. Unfortunately, Medicare doesn’t cover everything. As you enter your last decade of work, take a look at all of your benefits and consider your needs. If there are any medical procedures you want done or prescriptions you need updated, be sure to make those pre-retirement appointments while you can still use your insurance.
Team Up With Your Partner
Those who are married or in long-term relationships understand that communicating openly with your partner and working as a team is crucial to making your finances work. That openness and teamwork should extend to your plans for retirement as well. If you haven’t fully mapped out your joint vision of how you want to spend your time in retirement by the time you’ve turned 60, now’s the time to start talking.
“Retirement is a major life transition, and you have to be patient with yourself and your spouse,” explained Patti Black, partner and CFP(r) at Bridgeworth LLC. “Most retired couples do NOT look like those pictured in ads and commercials! Spouses need to talk to each other about expectations in retirement – expectations regarding lunch (are we eating together? Separately?), how much they are willing and able to babysit grandchildren and how work around the house may change.”
One very important topic you’ll need to cover involves what will happen when one partner passes away. While it’s likely to be a tough discussion, preparing for the worst now will greatly help the surviving spouse in the future.
“I suggest doing a few retirement budgets to reflect possible changes in income: one when both of you are retired, one if your spouse passes away first and another if you pass away first,” wrote Tania Brown, financial coach, CFP and owner of Financially Thriving Mom. “Doing this helps a couple to understand how much income they will have if their spouse passes away. It will also help them determine if they need to help their spouse supplement income with additional life insurance or even the best pension choice to maximize income now and for their surviving spouse.”
Top Off Your Emergency Fund
An emergency fund can help you keep your finances afloat in times of trouble, and it’s a good idea to maintain this monetary safety net throughout your adult life. However, your last few years before retirement provide the perfect opportunity for you to increase your emergency fund and replace any money that you’ve pulled from it in recent years.
Michael Shea, financial advisor at Applied Capital, recommends having 12 months of your expenses in a fund separate from your retirement savings to help with emergencies or short-term goals.
“This will help you stay out of your retirement assets so they can grow tax-deferred or tax-free for a longer period of time,” Shea explained. “You can also avoid potential taxes by not having to take out additional funds from retirement accounts to cover emergencies.”
Maintain a Side Stream of Income
You’ve cut the cake at your retirement party, clocked out for the last time and begun your new life as a retiree. Does this mean that your days of working are completely over? Not necessarily! Lori B. Rassas, HR consultant, executive coach and author, notes that having an additional source of income through your retirement (such as one through a side hustle) could prove to be extremely beneficial.
“Aside from the fact that a side hustle will keep your mind sharp and will enable you to continue to develop professional and personal connections, this will also help you stretch your retirement funds over a longer period of time and provide you with some level of protections against any unexpected financial disruptions,” Rassas wrote. “There are many ways you can develop either an active or passive income stream which will enable you to continue to earn money without the investment of a significant amount of time.”
Looking for side hustle inspiration? We’ve created a list of side work and freelancing ideas to get you started.
Revisit Your Will and Estate Plan
Your will and estate plan should be updated whenever you’ve hit a major life milestone — yes, retirement counts!
Additionally, if you’ve delayed talking about your estate plans with your children, it’s time to start the conversation. Claire Hunsaker, CEO of AskFlossie, notes that exposing your descendants to your plans gives them a chance to practice for the future.
“The longer you leave it, the harder it gets,” Hunsaker explained. “The conversations will become more involved and complex as you age. Start by discussing your living will. As you move through your sixties, expose them to more of your estate plan, financial plan and wishes.”
Hunsacker also advises involving multiple people in your will and estate plans to avoid messy situations. “I know people who were robbed blind by unscrupulous executors,” she warned, “That’s less likely if you have multiple people involved.”
Enjoy Your Retirement
Retirement is an exciting time that’s worthy of celebration – don’t forget to have fun! You can use your free time and savings to travel, spend time with loved ones, move to a new place and invest in the things that you’re most passionate about. You can do as much or as little as you want to — you’ve earned it!
Money Advice for Every Decade
Good financial health is great to have at every age. Check out more of Top Dollar’s decade-specific money tips: