Financial Advice: Money Strategies For Your 60S

Money strategies and financial advice for your 60s.

Managing your money in your 60's becomes potentially complex because of retirement. Most significantly, at age 59 ½, you become eligible to make penalty-free withdrawals from your tax-deferred retirement accounts like traditional IRAs and 401(k)s and tax-free Roth IRAs. Timing these withdrawals is important to ensuring you do not outlive your assets.

Because you are not required to take minimum distributions from tax-deferred retirement accounts until you are 70 ½, and you are not required to ever take distributions from Roth IRAs, it is best if you can postpone making withdrawals for as long as possible. This maximizes the amount of time that your assets can grow without being taxed, thereby increasing your total retirement assets. However, even if you do not take withdrawals in your 60's, you may want to adjust your asset mix within your retirement accounts.

As you approach retirement, and certainly once you retire, you will need current income from your retirement savings. Because of the effects of inflation on your purchasing power, you will need to maintain a significant exposure to stocks to avoid falling behind. Nevertheless, because of your current spending needs, you will want to increase the percentage of your portfolio allocated to bonds, and you may want to favor dividend-paying stocks. In addition, you will want to maintain adequate cash reserves for unexpected expenses. Having cash available will prevent you from having to sell assets during a market downturn, which could devastate your retirement savings.

Another important aspect to financial planning in your 60's is eliminating and staying out of debt. Most debt, especially credit card debt, has interest rates that are far higher than you could possibly hope to consistently achieve through investing. The compounding effect can rapidly overwhelm your assets. In addition, paying off your mortgage is often smart. Usually your payments have a very little or nothing allocated to interest in the final years of a mortgage. This makes little or none of your mortgage payment tax deductible, so it can make sense to pay it off and reduce your overall interest expenses. Particularly if your mortgage has a high interest rate, you may achieve a greater return on money spent to pay off your mortgage than you would receive by investing it.

Evaluating your overall financial position is also important at this time because you may want to purchase additional types of protection to secure your retirement. Particularly if you have little investment experience or come from a family of long-lived persons, investing a portion of your retirement assets in an annuity can be sensible. If the insurer remains solvent, you are guaranteed a stream of income for life. This protects you from outliving your assets. Long-term care insurance is also easier to acquire while you are in good health and younger. Such insurance can help preserve your retirement assets if your health declines and you require significant medical assistance. Inflation-protected bonds can also provide peace of mind. However, aspects of their taxation make them most attractive for tax-deferred and tax-free retirement accounts.

Social Security also plays an important role. You have the option of taking Social Security early or at your normal retirement age. Generally, if you live long enough to receive Social Security for more than 11 years, you will come out ahead by waiting until normal retirement age. Balancing this with taking it early and postponing withdrawals from retirement accounts can make the decision more difficult. Your present health and your family's longevity provide additional information for your decision.

The many changes that occur in your financial situation that result from retirement can make financial planning in your 60's complicated. Above all, identifying all of your sources of income, including Social Security, pensions, retirement accounts, and taxable accounts, and matching these with your planned expenditures over 15 or more years is critical to success. Because about 50 percent of people who reach 65 are likely to live past 80, taking a long-term perspective is important. Your rate of withdrawal from your retirement assets and how they are invested are essential to managing your money in your 60's.

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