Financial Planning Through the Ages - Top Tips for Sixty Somethings

Sixty Somethings are a growing force in the labor market which isn’t surprising since we are living longer and have changed how we view retirement. But whether you are already retired or are still working, you will need to make some key financial planning decisions affecting your retirement. Here is a list of Beacon Pointe’s top tips to live life your way in your sixties and beyond.

1. Picture Your Future Lifestyle.

Now is the time to determine if your resources will allow you to live how you want to once you are not bringing home a paycheck, so you need to take a realistic look at your future lifestyle. What activities do you enjoy? Will you work part‐time? Will you downsize, relocate, or buy a second home? Do you plan on traveling? If you are married, your spouse may have very different answers to these questions, so we recommend brainstorming separately and then coming together to develop your joint vision. Once you have your vision, estimate how your income and expenses will change (feel free to download Beacon Pointe’s Expense Worksheet from our website www.beaconpointe.com). You will need those estimates to determine if your retirement picture is realistic, needs to be modified, or what it will take to make it a reality.

2. Create a Plan to Make Your Vision a Reality.

You may be shocked to learn that to retire at age 67 and replace 85% of your pre‐retirement after‐tax income, you might need to have saved about eight times your current income by age 60.1 While you can get an estimate using an online calculator, retirement is close enough to consider getting professional help, as slightly different inputs can significantly alter your data projections. A Beacon Pointe advisor can help you create a plan to get you on track and give you the framework to make key decisions such as how long to work, where to pull from first, how much you can afford to spend from your portfolio, whether to work part‐time, whether you can afford to buy a second home, or whether you need to scale back a bit. Before you decide to retire, consider doing some serious number crunching; keep in mind that re‐entering the workforce might be difficult, and a new job might be less lucrative.

3. Save Like Crazy.

If you must save more to get on track for retirement, make sure this is your priority above all else, including helping your children. Whether you are saving to get on track or just adding to your nest egg to give you more financial freedom, you should know where to direct your resources. First, pay off any lingering credit card debt since the interest charged is likely greater than what you would earn on your investments. Next, make sure you have enough cash set aside to cover six to twelve months of living expenses, as emergencies will pop up. It can hurt you financially if you must liquidate investments to cover living expenses in a down market.

The first priority is to eliminate credit card debt and bolster your emergency fund. Once this is done, if you are still working, get busy maxing out your contributions to tax‐advantaged retirement plans (e.g., 401(k)s, IRAs) because investments here can grow quickly since you are typically able to contribute pre‐tax funds which then grow tax‐deferred until you take distributions later in retirement. If your company offers a 401(k) you could contribute up to$30,500 in 2024. If you’re self‐employed or a business owner you have several attractive tax‐advantaged plans available to you, so speak with your advisor. Even if your employer doesn’t offer a plan or you are a non‐working spouse, talk to your advisor about funding an IRA (up to $8,000 in 2024). If you can save more than what you can contribute to retirement plans an advisor can help you put those additional savings to work. If you have income but are not working, reinvest your surplus cash flow back into your portfolio to build a buffer for future down markets or unexpected expenses.

4. Carefully Consider How and When to Take Social Security.

One of the biggest financial decisions you’ll make in your sixties is deciding how and when to take Social Security. While most Americans need to collect Social Security as soon as it is available (age 62 or 60 if you are widowed) to make ends meet, Beacon Pointe’s top tip here is to avoid taking benefits too soon. Taking benefits at 62 means you will only receive about 70% of the monthly benefit otherwise available to you at your full retirement age (“FRA”), which is 67 for those born in 1960 or later. Plus, if you are still working while collecting Social Security and haven’t reached your FRA, Social Security will reduce your benefits by $1 for every $2 earned over the earnings cap ($22,320 in 2024). Delaying taking benefits until age 70 can increase your benefit up to 124% of your FRA benefit, so if you can swing it and have a normal to long life expectancy, it probably makes sense to take advantage of the 8% annual bump in benefits you’d receive by delaying until you are age 70 (don’t delay taking spousal benefits beyond your FRA as these do not increase after FRA). For questions or an estimate of your benefits, contact Social Security (800) 772‐1213 or http://www.ssa.gov/.

5. Apply for Medicare on Time.

If you do not apply for Medicare during your initial enrollment period, you may face a gap in coverage and permanently pay higher premiums (Part B premiums increase 10% for each 12‐month period you delayed). Unless you are already receiving Social Security before your 65th birthday, you won’t be automatically enrolled in Medicare Part A (hospital insurance) and Part B (medical insurance) and will need to enroll during the Initial Enrollment Period (“IEP”) seven‐month period that starts three months before the month in which you turn 65. You may not have to sign up for Medicare Part B or pay Part B premiums if you or your spouse are still working and are covered under an employer’s plan. If you are eligible for a Special Enrollment Period (“SEP”) this extends your enrollment period until eight months after termination of employment or healthcare coverage. Be sure to check with the employer’s human resource department though as some coverage won’t qualify you for a SEP (non‐credible coverage, covering few employees or COBRA) so you will need to sign up during the IEP. Medicare is complex and Beacon Pointe is here to help provide you with Medicare education and enrollment assistance.

Medicare doesn’t cover everything, so when you sign up you should also consider a Medigap or Medicare Advantage plan. For an additional premium, a Medigap policy supplements your Medicare Part A and B coverage to reduce your out‐of‐pocket costs but does not cover prescription drugs, so you should also consider enrolling in Part D when enrolling in Part A and B if you go the Medigap route. If you decide to purchase a Medigap policy, do so during your IEP to guarantee acceptance and avoid premium penalties. Alternatively, consider a Medicare Advantage plan if you want lower plan premiums and more of an HMO style plan. These Part C plans replace your Part A and B coverage and typically add in prescription drug, dental and vision care coverage, but through the plan’s providers. Please contact your Beacon Pointe advisor for enrollment assistance.

6. Review Your Investments.

At some point, you will switch from adding to your nest egg to drawing from it (if you haven’t already). It may be a good time to get professional help to ensure that your accounts are consolidated and organized, you are taking distributions strategically, and your accounts are properly diversified and allocated based on your risk tolerance.
An investment advisor can help determine if a portion of your portfolio should be invested more conservatively, or on the flip side, invested to take advantage of a longer time horizon as you might not touch a portion of your portfolio for 15‐30 years. If you are invested too conservatively, you might lose out on the potential for growth that can help stretch your nest egg over your lifetime and keep up with inflation.

7. Have Back Up Plans.

Most people over age 65 will have some health deterioration requiring them to stay in a long‐term care facility or have help at home with the activities of daily living (getting around, eating, and bathing). Medicare doesn’t cover long‐term care (LTC) expenses. Make sure you either set aside funds to cover this likely future cost or get moving on applying for an LTC insurance policy because premiums increase and your insurability declines with age. Your sixties are also the time to make sure you have an estate plan to control who receives your assets and how key people will distribute your assets and care for you on your incapacity or death. If you have a plan but haven’t reviewed it in five years, or you have had some major life changes occur (marriage, divorce, or the birth or death of a loved one), it is time to call your attorney for a review. Now is also the time to review your beneficiary designations on life insurance, annuities, IRAs, and workplace retirement plans to make sure the benefits pass to the right people, particularly since your will or trust won’t control these benefits.

If you could benefit from a conversation with our advisory team, we would be happy to provide a complimentary consultation.    

Consider our tips for thirty, forty, fifty, seventy and eighty somethings.

 

[1] Fidelity. (August 2023). How Much Do I Need To Retire? https://www.fidelity.com/viewpoints/retirement/how-much-do-i-need-to-retire

Important Disclosure: Beacon Pointe Advisors does not offer legal or tax advice. Please consult with the appropriate tax or legal professional regarding your circumstances. This information is not intended and should not be relied upon as individualized tax, legal, fiduciary, or investment advice. Only a tax or legal professional may recommend the application of this general information to any particular situation or prepare an instrument chosen to implement any design discussed herein. Nothing herein should be relied upon as personalized investment advice, nor should it be considered an individualized recommendation, offer or solicitation for the purchase or sale of any security or to adopt a specific investment strategy. An investor should consult with their financial professional before making any investment decisions. Beacon Pointe provides links for your convenience to other providers’ websites. Beacon Pointe is not responsible for errors or
omissions in the material on third-party websites and does not necessarily approve or endorse the information provided.

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