Your Money, Your Life: Those is their 60s and beyond must figure out how to

Your Money, Your Life: Those is their 60s and beyond must figure out how to

15 October, 2007

This is the last part of a four-part series on what the key financial issues are for people at various stages of their lives.

This is it. Retirement is right around the corner if it isn’t here already. Hopefully you have planned well, but if you haven’t saved enough, having the retirement of your dreams might be tough.

If you are still working, you should save as much as you can. And, if you haven’t completed a long-term retirement analysis to project how your current assets will support your lifestyle during retirement, now is the time.

Long-term care insurance is still an option for those of you still in your 60s. The longer you wait to purchase this insurance, the more expensive it is, so it often not viable for those above 70 years old.

The biggest issue you face, however, is the loss of income. Instead of cashing a paycheck from an employer, you are now going to have to pay yourself. How are you going to do that?

Preserving Capital

The main goal for most retirees is preservation of capital. People are living longer and this may put a strain on your 401k, IRA or other assets.

“If you have been an aggressive investor through the years,” said Wendy Shick, CPA, CFP, principal, Mentor office, “you may want to talk with your financial advisor about changing your asset allocation to incorporate more fixed income investments to avoid a potential downturn in the stock market.”

And, if you aren’t yet ready to start drawing down your retirement account, you need to seek advice as to whether you should withdraw from your taxable and non-taxable accounts. The right strategy and sequence can make a big difference.

Collecting Social Security

Social Security is complicated, especially when both a husband and a wife are involved. It’s best to contact the local Social Security office to go over your options.

“If you start collecting Social Security between the ages of 62 and your full retirement age, you really need to understand the rules,” Shick said.

If you are waiting until you reach your full retirement to collect Social Security, there are fewer considerations. However, this may not be the best solution for everyone.

“One of the many pitfalls to consider is whether or not you will continue working after you start collecting Social Security,” said Frank Festi, CPA, CFP, shareholder, Medina office. “That’s when things get complicated.”

The Social Security Administration’s Web site, www.ssa.gov, is an excellent resource.

Supplementing Retirement

There are many reasons why someone will work during retirement. If you need to supplement your income or want to start that second career you’ve always dreamed of, then a part time job may be in your future.

“Often, people who were financially successful during their careers aren’t ready to pull out,” Festi said. “They often choose to continue working, just in a different capacity – like consulting.”

Some retirees often decide to start their own businesses. “They find it very gratifying since they can select the work they want to do and when they want to do it,” Shick said.

Income earned while you are collecting Social Security must be closely monitored if you started collecting Social Security before your full retirement age. In 2007, an individual can earn only $12,960 until they have to pay back $2 for every dollar earned over the limit.

“A little over the limit is not critical. However, if you earn substantially more, you are limiting your future Social Security checks,” Shick said. “You could then be required to pay back all of your Social Security checks for each year.”

As you make the transition into retirement, it is important that you develop a plan. Go ahead. Travel. Spend time with the grandkids. Savor life. Just make sure you monitor your plan so that you don’t spend your nest-egg too soon.

What to do with a windfall?

If you come into some extra cash, consider the following:

·Pay off credit card debt with high interest rates.

·Invest it. Depending on your tax bracket, you may want to

omake a catch-up contribution to your IRA or 401k

oconsider a Roth IRA

·If your finances are taken care of and education is important to you, put it in a 529 plan for children or grandchildren.

·Take a vacation and have fun.