How to Catch Up on Retirement Planning in Your 60s
By Taylor Gordon
Betty is a 62-year-old Baby Boomer in the home stretch. She’s a divorcee navigating the path to retirement on her own with her beloved pet schnauzer, Mickey. She’s held steady, decent paying jobs throughout her career. However, she started contributing to her 401(k) later in life.
As retirement draws near, she feels the pinch and wonders how long her savings will last. Betty knows she has Social Security to fall back on, but she wants to maintain her current standard of living and her Social Security benefits won’t be nearly enough. At this age, she pictured herself protecting her money and coasting into retirement. Instead, she plans to postpone retirement for as long as she can.
A Shift in Retirement Expectations for Baby Boomers
It appears a large majority of Baby Boomers can relate to Betty’s dilemma. According to a survey by Transamerica, 4 in 5 people in their 60’s plan to work past 65 (or are already working past 65). And 42% are planning a phased transition into retirement which includes a shift from full-time to part-time work or work in another capacity.
Don’t fret if your dream to retire on a beach in Hawaii is slowly fading. Although retirement age is knocking at your door, it’s still possible to redesign your dream retirement, make a few adjustments and enjoy your golden years.
How to Get Retirement on The Right Track in Your 60's
1. Map Out Your Own Transition into Retirement
Baby Boomers are either working longer, taking part-time jobs, switching careers or pursuing other passions. Think about where you fit into the spectrum. If you’re considering a phased transition, the first place you should look to for flexible work is your current employer. Some companies offer a phased transition plan where your hours slowly decrease until you reach full retirement. Others will accommodate a shift into a part-time position, or another job function with a more flexible schedule.
In fact, 73% of Baby Boomers in their 60’s believe their transition will take place at their current job, according to the Transamerica study. If your company doesn’t have a phased transition program, speak with your human resources department to learn about other options.
Working longer gives you the flexibility to delay withdrawing from your nest egg and you can postpone claiming Social Security benefits. In both cases, delaying retirement means more money for you in the future.
2. Delay Social Security and Maximize Your Benefits
We all know that we can start collecting Social Security at the age of 62 and postponing Social Security increases the amount of benefits we get. But do you know how much? Social Security benefits increase by 8% each year that you wait to start getting benefits. Needless to say, patience pays.
If Betty can hold out until 67 (or close to it), she’ll have a higher monthly income from Social Security to combine with withdrawals from her retirement fund. This strategy may help her keep the standard of living she desires.
There are also other Social Security benefits you may not even be aware of. For instance, your spouse can earn up to one-half of your Social Security benefit in addition to your own. And your family may be eligible for survivor benefits if you pass on. Make sure you understand the entirety of what Social Security offers, so you and your family can collect the money you deserve.
3. Lower Your Monthly Expenses
As part of the transition into a fixed income, you should start budgeting your monthly expenses and learn where you can cut back on your spending. Pay off any lingering debt, eliminate unnecessary expenses (magazine subscriptions, premium TV channels, unused gym memberships, any premium-level services) and take full control of your personal finances now while you are still employed.
If you haven’t saved enough at this point, consider using your home to finance your retirement. This is the perfect time to consider relocating to a place where the cost of living is lower. You can invest the difference in your home equity to fund your retirement in the long-term. Use aboutLife’s retirement location tool to see how much you can save if you move to another location.
4. Consider a Health Savings Account
If you still work and qualify for benefits, you can take advantage of an HSA or Health Savings Account. An HSA is an account that’s coupled with a high-deductible health plan and you can use it to stash money away for medical expenses.
It’s similar to a 401(k) and useful because the money you contribute can grow overtime. You can even make catch-up contributions up to $1,000. An HSA is completely tax-free (if you follow the rules) and tax-deductible. However, you can’t enroll in an HSA and Medicare at the same time. You need to open an HSA account and fund it right away if you’re closing in on 65.
5. Go Over Your Investment Allocations With an Advisor
It’s time to protect the money that you’ve accumulated. Reevaluate the risk of your investment portfolio and make adjustments where necessary. If you need help, speak with a financial advisor to discuss your goals and how to choose allocations that are appropriate for your age and your goals. You may even want to reach out to a few professionals to get a second opinion. After all, you’re managing your life’s savings here. Be 100% certain your hard-earned money is in the right place before heading into retirement.
6. Sign Up for Medicare at 65, No Matter What
You can enroll in Medicare three months before your 65th birthday and for three months after your birthday month. If you don’t sign up during your enrollment period you’ll get penalized with a higher premium. The increase can be up to 10%. Don’t lock yourself into a higher rate. Sign up on time even if you don’t need it.
7. Get Long-Term Care Insurance
Unfortunately, we cannot predict what our medical needs will be in the future. Even if you have Medicare, you can’t rely on it for long-term care or custodial care like a nursing home. Medicare will cover some of the expenses from long-term hospital stays, but it may not cover every service provided. The rest will fall on your shoulders.
Long-term care insurance coupled with your Medicare insurance can relieve you and your family of the financial burden should you need additional care due to a serious illness or accident.
A few things to keep in mind while shopping for long-term care insurance are historical premiums and inflation of medical expenses. Since companies can change the premium, check the increase history to get an idea of whether or not you’ll be able to afford the plan in the future. Since, medical costs will surely increase, choose a policy that has an inflation rider to cover yourself.
Chart Your Own Course to a Fulfilling Retirement
The permanent vacation aboard a cruise ship sailing the globe may be a retirement trend of the past and that’s OK. Everyone has a different view of retirement anyway.
You can still chart a satisfying course even if it requires work past your full retirement age. Be sure to take advantage of each of your savings options to have income on top of your Social Security checks in retirement. Develop your phased transition plan early to weigh all options and choose one that works for you.
Although Betty didn’t expect to work long past 62, she feels positive about her decision to delay retirement. A slow transition from her full-time schedule to part-time gives her the opportunity to explore other passions. She’s considering a dog walking and pet sitting business as a passion project for her 2nd act to make more income.
Like Betty, you can think outside of the box to live comfortably in retirement. Use aboutLife's Retirement Planning Tools to design the retirement you want.