Some retirement strategies make sense at any age, but as workers near the finish line, there are specific tools and approaches that may pay dividends.
“Establishing an emergency fund of three to six months of expenses is the foundation of a good financial plan,” says financial planner Curt Stoltzfus. “Getting out of debt before retirement increases the odds of successful retirement dramatically, not to mention the peace of mind it gives you.”
But planning isn’t just about the money. Would-be retirees also need to start thinking about how they’ll live their lives — and the expenses connected to that daily living — once they no longer have to report to the office.
Some retirees want to volunteer their time; others will want to save more or select investment vehicles such as annuities that might benefit charities with which they have a connection.
“They need to find a passion and a purpose once the work routine ends,” Stoltzfus says. “Putting yourself in a position to be generous and help others is ideal and is very satisfying.”
Here, several advisers offer a decade-by-decade approach to setting and meeting goals.
What retirement strategies should I pursue in my 50s?
“For many, these years are the prime earning and saving years,” says Jamie Detweiler, of Everence Financial. “These years can be a great opportunity to really ramp up retirement savings efforts.”
Starting at age 50, the IRS allows workers to add annual “makeup” money to several types of retirement plans, including traditional IRAs, Roth IRAs, 401(k) and more. If you’re in the position, consider increasing contributions to put interest to work on your behalf for a few more years.
This is also a good time to evaluate existing strategies, says Chris Hershey of Rogers & Associates. Many investors use targeted retirement funds that automatically adjust risk to become more cautious as the investor approaches the end of his or her work life.
But Hershey says it’s important to stay on top of that kind of automatic rebalancing. If you’re still working, he suggests a balance that is about 70% equities and 30% fixed-income investments. Only after retirement does he suggest, shifting that to a 60%/40% balance because you’ll still need decent performance to generate income for years to come.
Besides, he notes, “You’re getting close to nothing on those fixed assets now.”
Detweiler says other strategies for a person’s 50s include:
• Begin or continue retirement planning discussions with professional advisers.
• Review insurance coverage.
• Review tax planning, an essential step if other deductions, such as children and mortgage payments, are phased out.
• Be generous, both as a means of building connections with community organizations and for potential tax and other financial benefits.
• Update estate plans if children are no longer minors and do not need guardianship provisions.
I’ve arrived! I could retire in my 60s. What do I need to do now?
The early 60s “for many are an opportunity to fine-tune your retirement plans and prepare to transition to this new season of life,” Detweiler says.
Specific goals may include:
• Eliminate mortgages and other debt.
• Educate yourself on topics such as Medicare enrollment and costs, estimated Social Security payments and how they are affected by age at retirement, and general retirement income strategies.
• Fine-tune your specific retirement plan, including when you plan to retire, where you will live and what income you will need. This is also an opportunity to decide if you want to work part time or volunteer a portion of your time during retirement.
• Build a tentative retirement budget to ensure you have a good handle on costs unique to this season of life, such as medical insurance.
I’m in my 70s. What are some keys to a successful retirement?
Now, it’s about putting the money you’ve made to work for you in the most efficient way possible — and protecting yourself and your loved ones in the process.
“Retirees should be working with an adviser to establish a distribution plan that maximizes income and minimizes taxes,” Stoltzfus says.
Build and manage a retirement cash flow plan, closely monitoring your income and expenses, Detweiler adds. Here, his other tips for the post-retirement years:
• Review estate plans and estate planning goals, ensuring you have current power of attorney and other estate documents in place.
• Communicate end-of-life wishes to your health care power of attorney and others who will help coordinate care.
• Simplify. For many, this is a prime time to simplify the complexity of financial plans.
• Prepare for cognitive decline. Organize and share appropriate details about your finances with anyone who may assist you, including family and legal representatives.
• Be generous. Invest, both financially and in non-financial ways, in people, causes and organizations in which you believe and find ways to pass life lessons on to younger generations.
