Where Should I Be Financially at Age 60?
Where Should I Be Financially at Age 60?
Where should I be financially at age 60? If only it were that easy… if only there was a cut-and-dried number, this article could be answered in one sentence. However, as with just about all financial planning topics, “it depends.”
Crank up the internet and you’ll find answers like you should have 6 times your annual salary saved, while others say 8 times your annual salary, and other websites might frame it as 15 times your annual expenses. Depending on which calculator your pick, the output could vary wildly. There is no canned answer that universally applies to everyone.
Look at Your Career
The first question to ask is where are you in terms of your working career? Are you still in the rat race at your peak earning years? Are you beginning to enjoy the early years of your retirement? Depending on your answer, where you should be financially will be very different.
If you are still in the workforce, you should continue maxing out your 401(k), taking advantage of any employer match. If you are an executive and company stock is part of your compensation package, you should examine your holdings and make sure that you are not over-concentrated in company stock. If so, begin the diversification process as soon as possible. In addition, you should be looking ahead to your company’s retirement options (i.e., Will you need to decide when/how to receive a pension? Is there an optimal year to retire?).
If you are already retired, you should be focused on structuring your retirement income before starting Social Security and beginning Required Minimum Distributions from your IRA which must start at age 72. Many people pick up consulting income or “side gigs” to fulfill this gap. In some cases, it makes sense to pull money out of your IRA (although you don’t need it) in order to smooth out your income and take income in those low tax bracket years.
Social Security
The next consideration is Social Security and when to begin benefits. Yes, the government allows you to take your benefit early at age 62, but this is almost always a way to implode your long-term plan. It will reduce your benefit by 30%. At the very least, wait until full retirement age (FRA) to take your benefit. If you can support your cash flow until age 70, your benefit will
grow another 8% per year from FRA to age 70.
Asset Allocation
Finally, there is the topic of asset allocation. Here again, there is no one correct answer. Many people love the growth that equities provide and can stomach the volatility that goes along with it. However, there is a point where your investment portfolio needs more stability, provided by bonds because you will need to begin withdrawing from the portfolio. Never take
more risk than you need to meet your goals. A conversation with your financial advisor will help you find this happy medium.
Like anything in financial planning, where you should be in your 60s “depends.” No two people are alike in the composition of their financial profiles and life goals. While these are all things to consider, a conversation with your financial advisor will help refine your long-term plan and then continually adjust it as needed.
Have more questions? Contact Us
Missie Beach, CFP®, CDFA®
Senior Financial Advisor
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