By Matthew Gaude & Shawn McGuire
There are many natural milestones we reach as we go through life, everything from graduating high school and college to making major career decisions, getting married, and having kids. But as you draw closer to retirement, milestones require some forethought and planning. So whether you are counting down the days until retirement or planning to work for another decade, here are some steps to consider as you celebrate your 62nd birthday.
1. Solidify Your Social Security Strategy
Just because you can claim your benefits doesn’t mean you should. If you start claiming benefits at age 62, your benefits are about 26% lower than if you wait for full retirement age (FRA), and over 40% less than if you wait until you are 70 to claim. Not to mention, Medicare benefits aren’t available until you’re 65, so if you are thinking of retiring at 62, you’ll need to factor in healthcare costs. 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.
Regardless, turning 62 is a good time to get the details in place and paperwork ready to start collecting your Social Security 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. 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. It’s also important to consider how long you’ve worked and your lifetime average monthly earnings, which are used to calculate your benefit. In some cases, working a few extra years can have a big impact on your monthly Social Security benefit.
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.
Finally, you’ll want to review your spousal benefits and spousal claiming strategies, especially if you are widowed or divorced. It may be beneficial to start claiming spousal benefits now and delay claiming your benefits until later.
Social Security is complicated, so it’s important to work with a financial professional that understands the available options and can help you determine the best strategy for you.
2. Take Advantage Of Catch-Up Contributions
If you’re not thinking about retiring just yet, consider putting more money into your retirement accounts. These next few years are your last chance to build up your nest egg for retirement. For 2019, you can contribute an extra $1,000 to an IRA for a total of $7,000, and an additional $6,000 to a 401(k) for a total of $25,000.
3. Consider Long-Term Care Planning
Don’t procrastinate on your long-term care planning. Generally, the last age long-term care insurance is affordable is when you are in your mid-60s. 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. And why is it so important? More than half of people turning 65 will need some form of long-term care during their lifetimes. On average nationally, it costs $275 per day or $8,365 per month for a private room in a nursing home, (1) so it’s critical to have a plan to pay for these costs. (2)
4. Create A Retirement Budget
Creating a budget is a good practice no matter what age you are, but it’s especially important as you draw closer to retirement. Mapping out your expenses and income will help you visualize a few scenarios to determine if you can retire early and what your income will look like at different points in your retirement.
Playing around with the numbers helps you to see how much you’re projected to spend, as well as gives you an indicator as to how much you may still need to save until you actually retire. This would be a good time to see where you can currently cut back on your budget to increase your savings for retirement down the road.
Have you thought through these four steps to take when you reach age 62? It’s critical that you take them seriously so you can maximize your money and feel confident in your plans. No one wants to reach the end of their career and feel panic or regret. If you would like someone to walk you through these decisions and the many other planning considerations that come with retirement, Live Oak Wealth Management would love to help. Call our office at 770-552-5968 or email email@example.com. Or, if you prefer, you can simply click here to schedule an appointment online.
Matthew Gaude is an *investment advisor representative and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. Working first as a commodity broker and then as a Business Development Manager for a national broker-dealer in previous jobs, he has the insights and experience to help clients understand the complexities of the market and implement strategies to minimize risk. To learn more about Matthew, connect with him on LinkedIn or visit www.liveoakwm.com.
Shawn McGuire is a financial advisor and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. He has worked in financial services since 2002 in positions ranging from financial advisor to stock broker and portfolio manager. As a CERTIFIED FINANCIAL PLANNER™ professional, he is trained to help clients with virtually all their financial needs. To learn more about Shawn, connect with him on LinkedIn or visit www.liveoakwm.com.
Securities offered through American Portfolios Financial Services, Inc., member FINRA/SIPC. Investment advisory services offered through *American Portfolio Advisors, Inc., a SEC Registered Investment Advisor. Live Oak Wealth Management, LLC is independently owned and not affiliated with APFS or APA.
Any opinions expressed in this forum are not the opinion or view of American Portfolios Financial Services, Inc. (APFS) or American Portfolios Advisors, Inc. (APA) and have not been reviewed by the firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk, and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.