By Chris Risenmay, CFP®
Your Second Growth season of life, when you are preparing for your much-anticipated retirement years, is a time to celebrate. It’s also a time when decisions start piling up and the milestone you have been working toward suddenly seems overwhelming. But it doesn’t have to be this way. Regardless of whether or not you are planning to say goodbye to your working years when you turn 65, here are some steps to take and decisions to be made when you reach this pivotal age.
Get Familiar With Medicare
Medicare eligibility begins at age 65. If you aren’t already receiving Social Security, you will need to manually apply for benefits. You can sign up as early as three months before your 65th birthday so that your coverage begins as soon as possible. You have plenty of choices for your Medicare plan, such as original Medicare coverage, prescription drug plans, and 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.
Make A Social Security Plan
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 2019, the limit is $17,640. 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 $46,920 for 2019. 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
An average 63% of today’s 65-year-olds will require some form of long-term care during their lifetimes. On average nationally, it costs $253 per day or $7,698 per month for a private room in a nursing home. 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 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.
Maximize Your Catch-Up Contributions
If you are still working, these next few years are your last chance to really build up your nest egg for retirement. For 2019, you can contribute an extra $1,000 to an IRA and an additional $6,000 to a 401(k).
Create A Savings Withdrawal Plan
When you do start living off of your hard-earned savings, you need a plan in place to ensure your money lasts you 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 minimize your tax bill, make your money last as long as possible, and enjoy your future retirement with less worry.
Second Growth Guidance
Retirement brings up a number of questions and decisions, from deciding where you’ll live to how much you can spend. While working with a financial advisor can be beneficial at any time in life, receiving objective advice and personalized guidance can be especially helpful as you walk through your Second Growth.
At Cypress Wealth Services, our goal is to make it easy for you to understand what you need to do to achieve your retirement dreams. We want to help you navigate the path to retirement, no matter what questions come up along the way. To learn more or to schedule an appointment, contact one of our offices today.
About Cypress Wealth Services
Cypress Wealth Services is an independent RIA firm providing financial planning and investment management to high net worth individuals, families, business owners, and institutions. Cypress Wealth Services is comprised of professionals with diverse backgrounds and extensive experience and qualifications. Cypress Wealth Services is uniquely qualified to serve a broad range of client needs. Their experience and expertise act as a foundation for their client service process, The firm uses The Second Growth, which focuses on efficiently protecting, growing, and transferring to their loved ones the wealth and legacy a person has already built. With offices in Palm Desert, CA, Tustin, CA and Anchorage, AK, the firm serves clients across the country in Wealth Management Services, Fiduciary Services, 401(k) Design and Management, Investment Reporting Services, Financial and Retirement Planning and more. For more information: visit www.CypressWS.com or call 760.834.7250.