What you do in your 60s can seriously impact your retirement. “Regardless of your earlier financial choices, the financial decisions you make in your 60s will have a profound effect on the rest of your life,” says Rose Miller, head of the JN Foundation’s BeWi$e Financial Empowerment Programme. “Between deciding when to start accessing your pension, figuring out health insurance and managing your investments, making the right choices will help ensure that you and your family are properly cared for.” Here are 7 financial flags never to ignore after 60.
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Claiming Social Security Too Early
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You can claim social security at 62, but by doing so you lose out on thousands of dollars. “You can apply for benefits at age 62, but the benefit you receive will be up to 30% less than it would be if you waited until what the Social Security Administration deems ‘full retirement age’ (FRA),” says Morgan Stanley. “Unless you really need the money, consider waiting to apply. And if you can afford it, consider delaying your application for these benefits until age 70 when your benefit will be about 32% higher than it would be at FRA.”
Spending, Not Saving
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Spending lots of money on non-essentials, even if it’s for others, can deplete your savings faster than you imagined. “Another big regret of clients is paying children’s bills, gifting them money and helping their kids get back on their feet,” Kevin Chancellor, CEO of Black Lab Financial, tells AARP. “They regret spending so much money on their children to help them get ahead when they should be funding their own retirement.”
No Emergency Fund
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People over 60 should have an emergency fund to protect retirement savings. “Your emergency fund can protect your investments that produce income after retirement,” attorney Lyle Solomon, Esq., tells the National Council on Aging. “The more money you can save in your emergency fund, the less you’ll need to withdraw from your investments. Remember, you should only use your emergency fund for a planned purchase. Try to save at least 20% of your monthly income in an emergency fund.”
No Long-Term Health Insurance Planning
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Invest in health insurance to protect yourself. “You may feel strong and healthy now, but you don’t know what the future may bring,” Miller says. “That’s why it’s important to include in your retirement plan a solution to pay for any long-term care or medical expenses you may need down the road. Some people may prefer to put money aside to pay for their care, however, it is not a good idea to ‘self-insure’. A long-term or critical health event would devastate your financial plan. You can’t afford not to have some form of insurance.”
Asset Rich, Cash Poor
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Experts warn that longer life expectancies leave some seniors in a tricky financial situation with cash. “What this means is that these people typically have valuable assets, usually a house, but limited cash on hand or other meaningful income,” Miller says. If you have valuable property but no money, it might be a good idea to downsize. “This can convert into cash the equity held in the family home and reduce expenses associated with upkeep of a larger property.”
No Proper Budget
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An important part of retirement planning is making a budget and sticking to it. “Even with other sources of income, the margin between what many older adults spend versus what they take in can be razor-thin,” Medicare expert Brandy Bauer tells the National Council on Aging (NCOA). “Even if you already have and use a budget, looking at ways to decrease your spending can be a great way to make those pennies count.”
No Real Tax Planning
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Not planning ahead for taxes could cost you money. “Taxes are a missed opportunity for many retirement savers,” financial professional Joseph Leary tells MassMutual. “Projections and planning can potentially tell you whether you would be better off contributing to a Roth IRA today, instead of a 401(k) or traditional IRA, to lower your taxable income down the road.”