Are you in your 60s? Are you feeling the financial stress of an impending retirement? Avoid these three mistakes now to ensure retirement bliss is in your future.
As you forever etch closer to your golden years, you may look back at what you could have done differently to better secure your financial future. If you’ve reached your 60s and are having these concerns, you need to buckle down, knowledge up, and avoid these potentially devastating moves.
The number one point is especially true amidst a global pandemic. Many individuals have found themselves in a financial situation no-one could have predicted. In turn, some pre-retirees have let their emotions get the better of them.
The first mistake to avoid is panic selling all your invested stocks. Why? You’ll likely need stocks in your portfolio that keep generating investment growth for you during retirement. The second mistake is cashing out Social Security. Taking Social Security before you reach full retirement age means you’ll get a reduced benefit amount. If you can hold out until 66, 67 or even 70, you’ll see your monthly benefit amount increase the longer you wait.
Emotions don’t have a place in financial decisions that could potentially undo all your hard work. While it’s understandably hard to prevent money matters from feeling personal, removing emotions from financial decisions can help set you up for future success.
While this sounds like a “no-brainer”, it’s surprising how many individuals in their 60s don’t watch what they’re currently spending, instead of the opposite: maximizing your 401(k) or individual retirement account contribution and decreasing your debt. In fact, more than 1 in 10 Americans may worry about having too much debt in retirement, according to data from the New York Fed Consumer Credit Panel. With the coronavirus outbreak paralyzing the US economy and leaving millions out of work, this number will have drastically skyrocketed.
If the last 12+ months have taught us anything at all, it’s to not live beyond our means and to always prepare for the worst. That includes investing time and effort utilizing retirement calculators and eliminating debt first (starting with the highest number).
Finally be sure to have an emergency cash fund tucked away should the worst happen. Your emergency fund should aim to cover three to six months of expenses—perhaps as much as a year if your job isn’t secure. That money should be kept in a safe, easily accessible account, which will spare you from having to tap retirement funds or run up your credit card balance for unexpected bills.
Because you’re “only” in your 60s, you may feel great now. However, as previously mentioned, you simply don’t know what the future holds. It’s been reported that medical costs are among the top financial worries of Americans, and with good reason: Medical expenses are often the largest expense for seniors. But with some research and careful planning, you can be confident about your health care costs and coverage in retirement.
Start by signing up to Medicare when you hit 65. Medicare will take care of a lot of your medical expenses, but probably not all. You’ll be required to pay a premium for some of your Medicare coverage, and you will probably want to purchase a private Medigap policy to cover all the costs that Medicare doesn’t (see more below). But be sure to sign up on time! Failing to do so will incur significant penalties for late enrollment.
Secondly, (and if you are you still in the workforce) Health Savings Accounts (HSAs) are tax-advantaged savings accounts designed to help people who have high-deductible health plans (HDHPs) with paying for out-of-pocket medical expenses. While these accounts have been available since 2004, too few eligible Americans are taking advantage of them.
Finally make sure you inquire and take up long-term healthcare insurance. About 60% of those turning 65 can expect to use some form of long-term care in their lives, according to the U.S. Health and Human Services Department. That may include a nursing home, assisted living or in-home care. The rule of thumb generally has been to purchase LTC coverage around age 55. However, when to get it really depends on your situation.
Many people in their 60s make the mistake of not taking retirement planning seriously enough. Putting in the work now to help avoid these three common retirement pitfalls could mean creating more peace of mind as you look forward to enjoying your years of freedom ahead.
At CKS Summit Group, our only objective is to provide you the most complete, actionable, and unbiased financial information available. If you have any questions about the information in this document or would like help with your retirement planning, contact us here today.