Over 50 Retirement Planning

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So you’ve started a little later than you should.  I know I have, but that doesn’t mean it’s time to just give up.

You will just have to be a little more fluid in your goals.

According to the 2012 Survey by Employee Benefit Research Institute 66% of US Workers report having some retirement savings.  While this may seem like a great statistic, it’s down from 75% from their 2009 survey.  Approximately 60% of respondents report that their retirement savings totals less than $25,000!   So what do you do?

First, congratulate yourself 

You’re aware of the problem and have shown the interest in getting better prepared.  Also, be thankful if you’re situation is one that can make some changes to your savings.  

Weigh your Social Security options.   

Social Security has been in the news lately, and seems to come up every election cycle and Congressional budget year.  Beginning at age 62, you’re eligible to file for Social Security benefits.  However, waiting to draw on you benefits until later, will significantly increase your monthly benefits. If you’re physically able to work until you are 66, you’ll see a 33% increase on your monthly benefits.  Another reason to try to exercise and stay healthy.

Take advantage of catch-up contributions

Once you’re 50 or over, you can contribute thousands more to your 401(k) plan than your younger colleagues. For 2013, you can contribute an additional $5,500 over the annual limit of $17,500, for a total of $22,500.

Don’t stop there. Since you’ve passed the Big 5-0, you’re also allowed an additional $1,000 catch-up contribution to an IRA, bringing the total contribution of $6,500 in 2013. One area where the Roth IRA differ from the traditional IRA is you don’t have to take annual minimum withdrawals from a Roth once you turn 70 1/2. However,  there are income limits on Roth contributions. You’re eligible if your modified adjusted gross income is less than $125,000 ($183,000 if you’re married and file jointly).

Dare to downsize.

Many folks plan to move to smaller homes as soon as the kids were grown and gone. Unfortunately, due to the market conditions in the 2007-2012 timeframe, many homeowners have seen the value of their homes decline.  If you’re one of those people in that situation, it may make sense to hold onto the property until the real estate market rebounds. However, it still makes sense to evaluate the potential of a sale of your primary residence. When doing this, include the upkeep costs, taxes, insurance, utilities, etc in the calculations. The money savings there might more than offset waiting for the prices to rise and the demand to increase. That saved money can be used to either pay down existing debt, or adding to the nest egg.

Consolidate your orphaned 401(k) plans

Over the years, as you’ve changed jobs,  you may have left your 401(k) funds with your old employer. Or you may have moved them to several different financial institutions.  Employer plans are typically limited in the breadth of offerings, many times focusing in company stock.  By moving your funds to a single, low-cost institution, you are most likely to have a wider range of investment opportunities.  These would include the King of Low Cost Mutual Funds, Vanguard.

Consider long-term-care insurance.    

As part of your financial planning, weigh the benefits of long-term-care insurance. If you or your spouse wind up needing a nursing home or significant home health care, all your retirement savings could be spent in a matter of months. Medicare doesn’t cover the cost of long-term care, and Medicaid isn’t available until you’ve spent down most of your savings. Long-term-care insurance could be a retirement saver in this event. This would become another part of your budget as you’ll be paying premiums for a number of years.  Some employers will provide this as part of their benefit plans for their employees.  For others, you may need to consult with a Broker.

Reassess what you’ll spend in retirement.    

Fluidity with your goals, right?  There are a number of tools, plans and rules of thumb when trying to determine how much you’ll need to live on in retirement.  While you may save on commuting costs, lunches out and new clothing, you’re also going to have much more free time.  How you decide to spend that time will help determine how much you’ll need.  Some folks think that playing golf 5 days a week is what they dream about when they get the golden watch.  Others, plan on traveling.  Still others haven’t quite figured it out yet.  Take the time to plan now, determining what you’d like to do now that you’re all grown up.  Don’t forget to add in the health care costs.  Unfortunately for all of us, health care costs are only going to increase.

Similar to what you would do when moving from a dual income to a single income, try living on the new income level.  This exercise will force you to cut back on spending, which means you’ll be able to save more. And at this point in your life, saving is one of the few things you can control.

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