What You Need to Know About Your Finances before You Hit 60

 

Know About Your Finances by age 60

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Retirement. What was once little more than a word, a concept that didn’t really matter much to us when we were young is now of vital importance. As we get older and as retirement age gets closer and closer, we begin to realize that every financial decision we have made in the past has brought us to this point in time.

For some of us, this will be a gratifying feeling because we know we’ve made most of the right decisions along the way, and for others, it will be terrifying because we haven’t taken this whole retirement business quite as seriously is we should have done. No matter which camp you fall into, if you’re under 60, you still have time to make some real changes that will make a difference to your quality of life during retirement.

Here are some important things you need to know right now if you want to make your retirement the best it can be:

How Much Longer You’re Expected to Work

If you want to know how much cash you’ll have to play with and what you’ll need to do between now and retirement to make things better for yourself and your family, you need to know when you’re expected to retire. On average, current Americans retirees quit work at the age of 65, but new retirees have been getting older and older in the past few years, with approximately 37 percent of all workers saying that they are likely to work past 65.

For many, working longer is a good option as it enables them to build up more savings for retirement, but if you work in a` very physically demanding job, or have health issues, it might just not be possible. Whatever your circumstances, you have to honestly appraise your ability to work and then take a close look at your finances to see what can be done.

When the Best Time to Trigger Social Security Is

Another thing that you need to know as you approach the age of 60 is when you should start claiming social security benefits. So many Americans trigger this benefit at the wrong time and end up with too little money to support them at the end of their lives. The best time to trigger Social Security is as far from now as possible. You see, the longer you delay claiming them between the ages of 62 and 70, the amount you’re due rises between 6 and 8 percent, which means you’ll be entitled to quite a bit more if you can hold out. I know this won’t be possible for everyone, and any future changes to the benefit might make things different, but right now, working longer or living off savings and private pensions until you hit 70 is the smart choice for most.

How Much of Your Income is Guaranteed

For many retirees, their Social Security will be the only guaranteed source of income they’ll get, but if you have any traditional company pensions, there is a good chance that you will be entitled to other sources of guaranteed lifetime income. You can find out if this is the case by talking to Human Resources and asking them to provide you with a statement for the benefits and pensions you’re due.

Once you know what you’re likely to be entitled to, you can start looking at your expenses to see if you’ll have enough to live on or if you’ll need to start saving more. You might also consider buying an annuity, which will give you a fixed income throughout your retirement. This is an increasingly popular option, which has helped countless retirees to better manage their money after leaving work.

What Your Safe Withdrawal Rate Is

 what you need to know about 401k

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If you’re not lucky enough to have a guaranteed lifetime income, and you’re going to have to make the cash in your 401(k) last as long as possible throughout your retirement, now is the perfect time to sit down and work out how much money you can safely withdraw each year, so that you don’t completely drain your account. This isn’t always easy because you don’t exactly know how long you’ll live, but if you work on the basis that you’ll live another 30 years after retirement, that should give you a good place to start.

A common way of managing the 401(k) used by many retirees is to withdraw no more than 4 percent of the balance each year. This is the best way to increase your odds of not running out of cash in that 30-year period after retirement, but it’s not a guarantee, and many financial experts are now recommending that this figure is dropped to 3 percent annually.

When to Concentrate on Paying Off Debts

When you’re planning for expenses in advance, not only do you need to know how much money you’ll have coming in, but you also need to know how much debt you’re likely to have. More and more people are retiring while still in debt, and this really isn’t ideal because it drains so much of their precious retirement income needlessly.

If you don’t want to be like them, you need to work out when is the right time to work on paying off your debts. If you’re fast approaching 60, that time is probably now. Start by paying off your most important and expensive debts, like mortgages, overpaying if you can, and then work your way down to smaller debts, which won’t change or mess with your future security quite so much.

Whether You Can Afford to Stop Paying Life Insurance

Most young people with their own families take on term life insurance policies because they are more affordable and because they will normally expire when they are no longer needed. If you are approaching 60, it’s the perfect time to take a look at your life insurance policy and determine whether you need to extend it, switch it with another policy or let it lapse completely.

A lot of people don’t want to let their life insurance lapse because they’ve been paying for it for so many years, but the thing is, a life insurance policy isn’t like a savings account, and that money hasn’t been building up – you’ve just been paying for the right to get a large payout for your family should you pass away before your time. If your children are now living their own self-sufficient lives, your mortgage is paid off, and you don’t need to worry about money in your retirement, there is a good chance that you can let that life insurance policy go and save the monthly cost for your retirement. Just be sure to talk it through with your family first.

Your Possible Future Medical Bills

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In recent years, a lot of retirees have gotten into serious financial difficulties because they have not properly considered any future medical expenses they could be expected to pay. Retiree health benefits are just not as common as they once were and because we all seem to be living longer, medical problems are pretty much a given for most retirees, which means that it’s probably sensible to look at purchasing a good medical insurance policy to see you through your twilight years, and that means you need to account for the premiums in your retirement financial planning.

Are you approaching 60? Have you been thinking more about your retirement? What plans have you put into place?

2 thoughts on “What You Need to Know About Your Finances before You Hit 60

  1. Some good points to consider Tommy. Regarding Social security, while in some aspects it seems better to wait so you can get a larger check, you will end up getting less of them. I’ve read a few articles on this and in the big picture, in my opinion, the financial difference probably wont be that significant. Hopefully you arent in a position that the extra $100 or $200 a month is needed to keep you afloat. For the SWR, I’d lean towards 3% and go from there based on my personal needs/ emergencies, how the markets are doing etc.

    1. Thanks for the comment Arrgo. The Social Security equation is one I routinely try to solve. Maybe because we are some years away my efforts haven’t been all that concentrated. It’s a little more tricky when considering my Bride and we have an idea of what we will do based on today’s information. As the time gets closer we will have to decide on the plan.
      Tommy

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