For many people, “the big five-oh” represents a significant cultural “milestone in age.” But it’s a little different for women, especially as the average woman’s life expectancy is close to 82. There is still a lot of time for new vistas to open up. It’s also a time when your bucket list needs to shift.
Your financial decisions should be at the top of that list. As you approach the “red zone” of retirement, a solid plan capitalizing on longevity becomes imperative. You want to avoid entering retirement while fighting a market decline and the necessity for income.
Here are six important financial considerations to make in your golden years.
Build Retirement Savings
You’ll likely need to rely on your retirement savings for an extended time. Make the most of your retirement savings by maxing out your contributions to a 401(k) or individual retirement account (IRA).
Catch-up contributions help you accomplish this. You’re permitted to make an IRA contribution of up to an additional $1,000 in 2023 and a 401(k) contribution of an additional $7,500 in 2023 (up from $6,500 in 2022).
Consider also setting more money aside in a health savings account (HSA) to help pay for medical expenses in retirement. For this year, you can add $1,000 annually if you’re 55 or older.
Deal With High-Interest Debts
The interest rates on credit cards, personal loans, and student loan debts are very high, which makes this the wrong time to have these kinds of debts.
Eliminate your debts using the “avalanche” method, which allows you to make the minimum payment on all debts and then prioritize the debt with the highest interest rate for any remaining funds.
The alternative, which is the “snowball strategy,” is to make the minimum payments on all accounts and utilize any excess cash to pay off the smaller debts before moving on to the larger ones.
If you overspend with your credit card, don’t ask for a replacement card; instead, lock the account or destroy the card. You have to do what you have to do to keep your debt worries down.
Analyze Investment Holdings
It would help if you had a more diversified portfolio to reduce portfolio risk. Your investment needs at this time shouldn’t be to generate the best returns but to reallocate your assets to align with your risk tolerance and financial goals, namely income and capital preservation.
“Invest in a way that will allow you to live your desired lifestyle.” Philip Weiss, CPA, CFA, and Principal of Apprise Wealth Management, says, “Many women invest too conservatively, resulting in a portfolio that lags inflation, and your money losing value over time.”
According to Wiess, women may also have a savings lag due to family obligations (taking care of children or aging parents) and a lower salary.
All of these factors support diversifying your portfolio through investment.
Investing in a diversified stock portfolio gives you the best chance of outperforming inflation. Better yet, balance your portfolio with less risky securities, such as bonds, that provide a livable income.
Consolidate Retirement Accounts
Suppose you’ve had a varied career with stints at more than one company. In that case, you might be spread out among several different retirement funds.
Maintaining consistency across several accounts becomes more complicated when various asset allocations are used. It’s high time you merged all your finances into one convenient location.
Keeping track of your statements, funds, and login credentials will be much simpler if you use a single central account.
Maintain An Estate Plan
Be on top of what happens to your money and property, even at death, and be able to give your loved ones a measure of financial stability. Get your estate planning documents in order: will, durable power of attorney, insurance, tax planning, and an advance healthcare directive.
Reviewing and updating your wills and estate plans is equally necessary if you have experienced significant life changes such as divorce, remarriage, or the death of a spouse.
If your documents haven’t been updated in the last year, now is the time to ensure that everything is up to date. A well-thought-out plan can also prevent probate, which can be expensive and take a long time for surviving family members.
Understand Your Social Security Options
It’s not too early to know the rules for claiming benefits and their impact. Regarding Social Security claiming decisions, there are a few things to consider.
You can begin claiming benefits as early as age 62, but if you wait until age 67, your benefits will increase by 6-7% per year, starting with your 62nd birthday. And by 8% per year from full retirement age until age 70.
You can get a benefit based on your ex-spouse’s benefit if you were married for at least ten years and got a divorce. If you are married, you should choose to file a joint claim.
Consider Long-Term Care
Unpleasant as it may be, a recent Genworth survey found that almost 70% of Americans over the age of 65 will need long-term care at some point in their lives. Without long-term care insurance, you’ll have to pay for your care or rely on family and Medicaid.
Regardless of your decision, share your plans with those who need to know.
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