At every stage of life, it is essential to understand our financial constraints. However, when we come to reach our 60s, the importance of financial planning becomes even more important. Approaching retirement and funding the rest of our lives can be a lot of pressure, which is why it requires taking some time and consideration. So that you are able to enjoy those precious golden years, take a look at these financial planning tips after the 60s.
FINANCIAL TIPS FOR WHEN YOU 60+
Downsize Or Refinance Your Mortgage
If you are living in a family house where there is only one or two of you, you may want to consider moving to somewhere smaller and more manageable. Not only will this be easier to make disability-friendly, but it can help you save money. If the kids have left the nest and you plan on traveling, a more affordable, the smaller property could be a great way to finance your lifestyle when you’re not working. Alternatively, if you’re determined to stay where you are, you can unlock equity to use for retirement by refinancing your home loan.
Establish A Realistic Budget
The average older couple with children above 15 years old spend just under $2000 a week. Do you know how much you spend? If you go over this amount or you’re not entirely sure what your expenditures amount to, it’s time to create a budget. Understand all of your income, outgoings, and savings so that you create a financial picture you can understand. Create a budget of how much you need to spend a month, how much you’d like to spend on personal care, and how much you’d like to save. This is a good way to get on top of your finances and control your spending.
Strategize Your Social Security
This is when the hard work starts paying off. You can begin taking benefits as early as 62 or as late as 70. The longer you delay drawing on your Social Security benefits, the greater the monthly benefits will be for the rest of your life. The difference can be substantial, so consider this before withdrawing them.
Top Up Your Emergency Fund
Tapping into point number 2, a savings account is essential. Having an easy-to-access emergency fund is critical in case the worst happens (such as a pandemic). It’s always wise to hold three to six months’ worth of expenses in a cash account to meet unexpected needs that pop up, but it is especially important as you prepare to retire.
Secure Life Insurance
If you haven’t already reviewed and updated your life insurance, now might be a great time to do so. You will need life insurance to help pay for expenses when you pass. Even if you have savings you think you could rely on. Life insurance pays out a death benefit to your beneficiaries to cover funeral expenses, remaining debt, and financial support to loved ones that relied on you. A well-planned life insurance policy can help your loved ones when you are no longer around. Feel free to contact us to schedule a complimentary review of your life insurance to secure the right coverage that meets your needs.
Contribute to an IRA
If you do not have a well-funded retirement account, you still have time to build it up. The IRS (Internal Revenue Service) allows people over 50 to make additional contributions to their accounts. You can continue contributing to a traditional IRA account until you are 70+, whereas you can contribute to both traditional and Roth IRA accounts at any age.
Continue to Save
While maximizing your IRA and retirement savings, it is essential to start saving more than the amounts allowed in these accounts. You can add tax refunds, bonuses, and any other lump-sum payments directly to your savings account.
Plan Your Withdrawals from Retirement Accounts
Know when funds can be withdrawn from your retirement accounts, as retirement plans have different rules for withdrawals. Generally, funds cannot be withdrawn from 401(k) accounts before you turn 60, except if there is a financial emergency.
Some retirement accounts allow withdrawals only after 70. You can talk to a financial advisor to know the right time for withdrawing funds, tax ramifications, and early withdrawal penalties associated with retirement accounts.
Know the Liquidity of Your Assets
You can also take an inventory of your collective assets to determine which funds can be accessed quickly during an emergency, including tax refunds, mortgages, and bank accounts.