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By Joe Arnold, AIF®
Every decade brings unique milestones, but the milestones in your 60s come along with more financial consequences and require more preparation. It goes without saying you want to enter retirement with confidence and excitement—but that doesn’t happen by chance. The trouble is that retirement planning can get confusing and complicated. If you aren’t paying attention, you can easily miss important deadlines.
To lend a hand, we’ve created the following “cheat sheet” to outline some steps to take and decisions to make when you reach the pivotal age of 65.
Get on the Medicare Train
Medicare eligibility begins at age 65. If you are already receiving Social Security, you will automatically receive Medicare too. But if not, you will need to manually apply for Medicare benefits. You can sign up as early as three months before your 65th birthday so that your coverage begins as soon as possible.
There are plenty of Medicare choices to make, such as what type of coverage to apply for, whether you want a prescription drug plan, and if you need supplemental insurance. Your premium costs will depend on your coverage choice and your income. Medicare can be complicated and overwhelming, so start researching now to make informed choices.
On the other hand, you aren’t required to apply for Medicare. Depending on your situation, you may be better off postponing your Medicare enrollment, especially if you plan to continue working and your employer’s healthcare plan is cheaper than what your Medicare Part B premiums would be. If this is the case, you can still enroll in Part A. It’s free in most circumstances, covers hospital-related expenses, and can supplement your employer’s plan.
Figure Out Social Security
If you have yet to tap into Social Security, be mindful of the fact that 65 is not quite full retirement age (FRA). If you were born between 1943 and 1954, your FRA is 66. Starting in 1955, two months a year is added again until the FRA becomes 67 for those born in 1960 or later. If you want to maximize your Social Security benefit, you’ll need to wait a bit longer before claiming Social Security. Regardless, turning 65 is a good time to get the details in place and paperwork ready to start collecting your benefits. If you are still working or don’t need the money to cover living expenses, you can delay receiving your benefits until age 70.
Keep in mind that the income you earn in the year before FRA and the year you reach FRA will impact your benefit amount. Any income you earn before the year in which you reach FRA reduces your Social Security benefit once it surpasses a specific limit. For 2021, the limit is $18,960. Once your earnings exceed that, your Social Security benefit will be reduced by $1 for every $2 you earn. The income restrictions change the year you reach FRA. That year there is a higher limit, which is $50,520 for 2021. Your Social Security benefit will be reduced by $1 for every $3 you earn once you pass that limit.
Creating a Social Security strategy will help you determine the best time to claim benefits and guide you in making decisions about how much to work in the years leading up to your full retirement age.
Consider Long-Term Care Insurance
More than half of people turning 65 will need some form of long-term care during their lifetimes; that’s why it’s critical to have a plan to pay for these costs. (1) On average nationally, it costs $290 per day or $8,821 per month for a private room in a nursing home. (2) But the older you get, the higher your cost for a long-term care insurance policy will be and the greater the likelihood of your application being denied. Generally, the last age when long-term care insurance is affordable is when you are in your mid-60s.
Cover Your Legal Bases
Although age 65 is far from the end of your life, as you get older and your health risks increase, it would be wise to use this milestone to get your affairs in order so your family is taken care of. Consider drafting a will, finding a power of attorney for your finances and health, and creating an advanced medical directive in case you cannot make decisions on your own.
Create a Savings Withdrawal Plan
When you do start living off of your hard-earned savings, you need a plan in place to help insure your money lasts through your retirement. You don’t have to start taking required minimum distributions (RMDs) from your IRA or 401(k) until you are 70½, but you may want to withdraw some money now to lessen the tax impact later. The key is to sit down and map out multiple scenarios to reduce your tax bill, make your money last as long as possible, and enjoy your future retirement with less worry.
We’re Here to Help
Retirement is often described as the “golden years.” But sometimes this stage of life can include some mixed emotions: sadness when saying goodbye to your career, joy to spend more time with family, anticipation for new adventures…and possibly some anxiety as you face a number of questions and decisions. Where will you live? How much can you spend? Although helpful at any time, now might be the time to enlist the help of an experienced financial professional.
We at Foundation Wealth Advisors specialize in providing objective advice as well as transparency as we guide you on your retirement journey—through your 60s and beyond. Our goal is to make it easy for you to understand the steps you need to take to achieve your retirement dreams, no matter what obstacles come up along the way.
If you’d like to partner with a financial advisor who is committed to putting your best interests first in all decision-making and recommendations, schedule a complimentary appointment by calling (440) 899-7535 or emailing me at jarnold@foundationwa.com.
About Joe
Joe Arnold is an independent financial advisor and the founder and president of Foundation Wealth Advisors, LLC, an independent firm whose advisors provide private investment management for individuals and families, as well as retirement plan consulting for small and mid-sized businesses. With 20 years of experience in the financial industry, Joe specializes in providing objective advice to individuals, as well as transparency in building and managing company 401(k) retirement plans. He is committed to putting his clients’ best interests first in all decision-making and recommendations. Based in Westlake, Ohio, he serves clients in the Cleveland, Akron, and surrounding areas, as well as throughout the country. Joe received a bachelor’s degree in business administration from Cleveland State University and is an Accredited Investment Fiduciary® (AIF®). He has been featured on national television, including CNBC and FOX Business, and quoted in various publications, including The Wall Street Journal, CNN Money, Forbes, and others. Joe lives in Rocky River, Ohio, with his wife, Allison, and their two grown children, Kevin and Keira. An avid golfer, he is a former Class A PGA of America teaching professional and NCAA Division 1 athlete. When he’s not working, he enjoys playing golf, reading, and honing his culinary skills. To learn more about Joe, connect with him on LinkedIn.
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(1) https://www.morningstar.com/articles/879494/75-mustknow-statistics-about-longterm-care-2018-ed
(2) https://www.genworth.com/aging-and-you/finances/cost-of-care.html