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Financial planning in your 60s

Take these steps now to ease the transition into your next life phase

Published: June 2014
Make major home improvements and purchases while you're still earning an income.

This article is part of a three-section guide that provides financial planning to-do lists for people in their 40s, 50s, and 60s. In addition, we flag each decade’s “pressure points”—those financial products likely to be pushed at you most aggressively—and suggest how you should respond.

So you in your 60s, the decade when most people retire. Your retirement could last another 30 years or so. While you’re still working, now’s the time to fully revisit your expectations—and an examination of how they might match reality.

• Consolidate your retirement accounts. Most people will hold at least eight jobs over the course of their working life. For many, that means juggling at least eight workplace retirement accounts. Consolidating all of those 401(k)s and IRAs gives you a clear picture of whether your investments are appropriately allocated, makes it much easier to keep track of your portfolio, and will cut administrative fees.

• Make the big repairs while you still have a salary. Replacing the water heater, fixing the roof, or buying a new car can significantly dent your savings. Pay for them while you’re still earning money.

Read about the best materials and practices for a home remodel in Consumer Reports' home improvement guide.

• Estimate your future budget. Conventional wisdom reassures preretirees that they’ll be able to get along just fine on 80 percent of their working-life budget. But that ignores the fact that living costs inexorably rise. For example, if you live in an apartment, the rent and maintenance fees will go up. Similarly, if you live in a house, you don’t just paint it when you’re 60 and forget about it for the rest of your life. “Look back over the past 30 years,” Marcia Mantell, an independent retirement business consultant in Needham, Mass., said. “How much did your household operating costs rise?” Her advice: Use that data to project ahead.

• Consider where you want to live. “It can cost 25 to 30 percent more to live in New York or California than Nevada or North Carolina,” Sean Ciemiewicz, a financial adviser in San Diego, said. “Consider other states that do not have income taxes and generally have lower costs of living.”

• Learn about Medicare and Medigap. Medicare doesn’t cover all of your health care expenses. You’ll probably also want Medigap supplemental health insurance to fill in the holes. That is complicated stuff, so it’s best to research the choices before you’re eligible at age 65.

Pressure point: Annuities

When you retire, your 401(k) retires with you—and plenty of insurance companies are hoping you’ll use the money to buy an annuity. The regular monthly payouts that annuities provide can be reassuring when other holdings fluctuate. But the choices can be confusing: variable or fixed; a fixed immediate annuity or fixed longevity annuity (one that begins to pay many years after it’s purchased); charitable gift annuities; a laddered portfolio of annuities. The list goes on, and each option comes with its own pros and cons. Variable annuities are often sold with costly riders and features that can top 4 percent annually. For that reason, if an annuity makes sense in your retirement investments, we recommend a fixed annuity. Choose a safe insurer by checking its rating; Weiss Ratings is more impartial than Moody’s, Standard & Poor’s, or Fitch. And be sure to consult a fee-only adviser to decide what portion of your investments to allocate to an annuity. 


Editor's Note:

This article appeared in the June 2014 issue of Consumer Reports Money Adviser.



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