Financial risks in your sixties

Your top priority: protect your nest egg

Published: April 22, 2015 02:45 PM

“As you move into your 60s, taking steps to protect what you’ve earned and accumulated becomes more front and center,” says Bernard Krooks, a lawyer with Littman Krooks in White Plains, N.Y., who specializes in elder care. Yet many of the most serious risks to your nest egg aren’t necessarily obvious. Many times you might not even think about them until you wake in a panic and wonder, “Did I ever remove my ex’s name from my 401(k) beneficiary form?” Or “Should I have listened to my agent when he tried to sell me umbrella insurance?”

Here are three risks you may not have considered – and advice on how you can protect your retirement savings.

For more information on this subject, read Financial Planning in Your 60s

You’re sued. You might think that you can cut back on your liability insurance once you stop carpooling kids or your teenage children grow up and move out. Think again, warns Rick Kahler, founder of the Kahler Financial Group in Rapid City, S.D. “Anyone can be the target of a frivolous lawsuit, especially if you’re perceived to have deep pockets.” And the last thing you want is for a lawsuit to drain savings earmarked for retirement when there’s little time left to rebuild them.

Action: Most insurance policies, whether for auto or home, include some amount of liability coverage; you must decide how much protection you need and are willing to pay for. However, because the higher liability limits can become expensive to buy through home and auto policies, Kahler recommends purchasing additional protection with an umbrella insurance policy that is equal to your net worth. Umbrella insurance is relatively inexpensive, at about $200 per year for $1 million of coverage.

You let insurance coverage lapse. With the kids grown and on their own, an increasing number of people are moving from the suburbs into the city or elsewhere. If you choose to rent while you test out a new lifestyle, “you need renters insurance—that’s an essential,” says Jeanne Salvatore, senior vice president of the Insurance Information Institute. But a poll by that organization in 2013 found that 96 percent of homeowners had homeowners insurance but that only 37 percent of renters had renters insurance.

Action: Renters’ insurance provides financial protection against the loss or destruction of your possessions from fire or smoke, vandalism, theft, explosions, windstorms, and water (not including floods). If you are unable to live in your apartment, the policy also covers the cost of living in a comparable apartment for a certain amount of time. The cost is relatively inexpensive because in most cases, renters insurance covers only the value of your belongings, not the building they’re housed in. The average annual premium is less than $200.

You don’t make your wishes known. “Relationships evolve as you get older,” Krooks says. “Someone you trust in your 40s to make important decisions for you may no longer be the appropriate person.” So while you might remember to update your will, you might forget to update other accounts, such as leaving your former wife as the beneficiary of a retirement account after you’ve remarried.

Another example: In the interests of family accord, you name all of your adult children equally as agents. Not a good idea. “I’ve seen six kids put on as power of attorney,” Kahler says. “It could mean that all six have to be consulted to make a decision—or that any one of them can make the decision, so whoever picks up the phone first wins.”

Action: Update your legal documents and estate plans every four to five years. If you have more than one adult child, consider making one the point person on health care decisions and give another the responsibility for financial decisions.

Catherine Fredman

Editor's Note:

A version of this article previously appeared in the April 2015 Consumer Reports Money Adviser.

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