The average American plans to retire in their late 60s. If you are within five to 10 years of your target retirement age, it’s important you take planning seriously, says Kiplinger’s recent article entitled “Turning 60? Ask Yourself These 4 Important Questions.”
There are some big questions to ask yourself, as you enter this major decade of life. Answering honestly will help you avoid costly mistakes and allow you to make any necessary changes to your retirement plan, while you’re still earning an income.
Do I Have Enough Dough Saved? One of the biggest fears of those nearing retirement is outliving their savings. A general rule of thumb is to have eight times your annual income saved by age 60, but this may change based on your situation. Consider your lifestyle expectations in retirement, when calculating what you need to save. You should also consider exactly when you want to retire and how long you expect to live in retirement. Look at your current health and family history, when mapping out your life expectancy. It’s essential to budget for different scenarios, including unexpected health care expenses, to calculate whether you have enough saved or if you need to play catch-up.
Will My Income Fluctuate? Probably, so you’ll need to be ready. To tell how much of your income might be subject to fluctuations, look at your income sources in retirement. These include 401(k)s, traditional and Roth IRAs, annuities, and any savings or investment accounts. The next step is to calculate what percentage of your retirement income will stay steady as you grow older, like pensions or Social Security. Compare that to the income that may ebb and flow as you take money out of different retirement accounts.
When Should I Claim Social Security? You can collect Social Security at 62, but for many, it might be worth delaying until full retirement age, which is age 67 for those born in 1960 or later. If you go ahead and claim Social Security before your full retirement age, your benefit will most likely be permanently reduced by as much as 30%. If you can hold out until age 70, you’ll get 100% of your benefit plus an additional 32%.
Is My Family Protected? The financial strain of caring for a loved one is tremendous. Family caregivers spend about 20% of their income on caregiving expenses. Long-term care insurance helps cover the costs of nursing home care and home health care, and it can also help families pay for chronic medical conditions, like Alzheimer’s or dementia. If you’re eligible and in good health, the best time to look at long-term care options is between the ages of 60 and 65. You should also review your estate plan as you enter your 60s. If you haven’t created an estate plan yet, meet with an estate planning attorney to get your documents drafted. If you have a plan, be sure your family knows who your attorney is. Review your will or trust to make sure your beneficiaries are current.
These questions will help you develop a retirement budget and income plan and will make certain your family is taken care of.
For more information visit my Wichita Estate Planning Attorney website.
Reference: Kiplinger (April 2, 2021) “Turning 60? Ask Yourself These 4 Important Questions”