You may have just started kindergarten or 1st grade. The television show you’re watching is interrupted by a special news bulletin. The date: November 22, 1963.
Walter Cronkite makes the announcement:
“President Kennedy died at 1 p.m., Central Standard Time,” the CBS broadcast journalist said, removing his glasses to look at the clock on a newsroom wall. “Two o’clock, Eastern Standard Time. Some 38 minutes ago.”
This and other events—scrawled across the pages of late 20th Century history—mark your upbringing in ways few others alive today can comprehend.
But now you’re six months shy of your 60th birthday. You are 59½ to be exact. Why is that age so significant?
It signifies a turning point of sorts in your life—on a number of fronts. In particular, the IRS allows you to make withdrawals from your retirement account without incurring a penalty. It is also nearly a decade after you were granted the right to contribute more to your IRA fund.
In this article, we explore your retirement options, your health-care concerns, and how to obtain the best advice to move vibrantly into those golden years. We also turn back the clock to take a quick look at how history may have shaped your outlook.
Building Your Retirement Savings
Financial professionals provide some depressing figures for many people approaching retirement. Many analysts say you should have at least $1 million in retirement savings to get you comfortably through a 30-year retirement.1
Those are some big numbers. If you’re moving toward retirement and you have little or no money in retirement savings, you’re not alone. Most Americans have less than $1,000 in retirement savings set aside.2
More than two-thirds also say they expect to run out of money sometime during their retirement.3 Even those closest to retirement, the baby boomers, are falling short of the target with one-third having less than $25,000 in retirement savings.4
If you’re 59½ and believe you’re ill-equipped for retirement, there’s still hope. The IRS grants those at that age special allowances to help bolster their retirement savings. The agency also exempts taxpayers who have reached that age from paying the 10% early withdrawal penalty.5
While you won’t have to pay a penalty, the IRS still requires you to file the money as income on your tax return if you do make a withdrawal from your retirement account. The money will be taxed as income. Certain Roth IRA withdrawals are not taxable.6
If your retirement savings are not quite up to par, the IRS provides a catch-up clause, which applies to people over the age of 50.7
Older employees may exceed the IRS’s standard elective deferral ($18,50012) to employees’ workplace-based retirement savings plans. Elective deferrals are contributions to retirement plans by the employer at the employee’s request. Deferrals apply to 401(k)s, 401(b)s, SARSEP, and SIMPLE IRA plans.8
Making Your Way Toward Social Security
Hitting the ripe, young age of 59½ puts you within shouting distance of Social Security eligibility. In fact, to break it down, you’re within 130 weeks, at the earliest. American workers are eligible for Social Security benefits at 62, but at reduced benefits.
Although you’re still a ways away, here are some changes to Social Security for 2018:910
• Social Security recipients received a 2% increase in benefits. The Social Security Administration (SSA) attempts to match annual increases to inflation based on Bureau of Labor Statistics calculations. The 2% increase is the largest since 2012’s 6%.
•The maximum earnings limit is $128,400. Earnings above this amount are not
•The full retirement age (FRA) continues to rise by 2 months a year. The FRA of those who turned 62 in 2018 is 66 and 4 months. The FRA annual increases will stop in 2022 at 67.11If you retire early and apply for Social Security benefits, the amounts will be reduced by:
·30% at 62
·25% at 63
·20% at 64
·3% at 65
·7% at 66
Your benefits will rise by 8% for every year you delay receiving benefits. If you wait until 70, you’ll receive 124% of your determined benefit.12
The SSA uses a formula to calculate your basic benefit, or “primary insurance amount.” The formula indexes your highest average monthly earnings over 35 years of work.13
The average monthly benefit is $1,369.27
What are the advantages of receiving benefits at 62 or waiting until 70?
Getting benefits at 62:14
You don’t think you’ll earn more than the retirement earning exempt amount, which in 2018 is $17,040.29 (It traditionally rises every year.)
You’re in ill health with below-average life
You expect your spouse’s benefits to be larger than
You won’t have other income sources or opportunities to earn
Your Social Security checks will be smaller, but you’ll collect 8 additional years of 30
The early age is the most popular choice of 31
Getting benefits at 70:15
You plan on continuing to work and earn more than the SSA income limit ($17,040 in 2018).16
You don’t have any retirement savings, you’re single, and you’re
Your spouse plans to continue working. A larger portion of your benefits is taxed because of the higher combined income. You’ll keep more of your income by waiting.
You’re in good health and expect to have a long
The average life expectancy of Americans age 65 today is about 34
Your spouse is younger or your spouse’s benefit is smaller. When you die, your spouse will get the larger Social Security amount.
Staying Healthy and Strong in the Golden Years
In 6 months, you’ll hit the big one: 60. That’s 6 decades, most of it through the latter half of one of human history’s most turbulent, tumultuous, and exciting centuries. While life expectancies vary, you can reasonably expect to live another quarter century.17
And with your temperament, you expect to take life by the horns and ride it full throttle. But, naturally, before you proceed, you ought to take stock of the most important part of your life, your health.
Unfortunately, your health changes over the years. After all, you’re not 20 years old anymore. You’re going to be 60. On the other hand, 60 just isn’t 60 anymore. In order to live life to the fullest, you do have to keep a closer watch on your health— whether you’d like to or not.
Here’s what you can expect at 60 and beyond:18
Your skin becomes drier as you age. That means you’re less prone to adolescent breakouts. However, your more fragile skin is susceptible to age spots and wrinkles. Prescriptions like hydroquinone (for the age spots) and retinol (Retin-A for wrinkles) work to give the appearance of rolling back the years.
Them bones may keep you sturdy and stable throughout your 60s—that is, if you’ve been relatively active throughout your life. However, years of sedentary living might pose a few health challenges. You might be looking at some achy joints from worn cartilage and loss of joint lubrication. Make no bones about it, maintaining a healthy body weight and some strength training may do the trick in restoring some of the spring to your step. Consider consulting with your doctors about supplementing with vitamin D and calcium.
You may want to scratch from your diet those 2-pound bacon cheeseburgers with super sides of onion rings and extra-large chocolate milk shakes. Your metabolism generally slows about 5% per decade. But health experts say you don’t have to gain weight. Staying active and cutting calories may be just the thing to keep you fit and trim.
The 60s do pose a unique but easily remedied nutritional challenge. Your body produces less hydrochloric acid, which decreases vitamin B12 availability. Talk with your doctor about a B12 supplement.
Acid reflux may also be a challenge as your stomach empties more slowly. This can also lead to constipation. Adding more fiber and water to your diet can help by protecting you from colon polyps.
Let’s get to the heart of your health:
The good news: Older hearts can pump the same blood volume as younger ones. The bad news? Heart disease kills more than 20% of people ages 65-74. Now back to the good news. Advances in medical technology have led to nearly a 30% drop in heart disease related deaths.37
Your senses start undergoing changes as you move into your 60s. Simple choices like turning the volume down and staying away from loud noises may help retain your hearing. However, nearly half of people in their 60s experience some hearing loss. Get a hearing test if you think you’re hearing is declining. Typically, those in their 60s need considerably more light (3 times) to read than people in their 20s. A healthy diet that includes fish oil and antioxidants can help.
Less sensitive immune systems make you less allergy prone. Allergies stem from over-reactive immune systems. The downside is you’re more susceptible to sickness. Chronic inflammation also restricts your body’s immune response. Since inflammation is connected to heart disease and diabetes, losing weight, consuming a healthy diet, and getting adequate exercise become increasingly more important.
Now let’s get to some of the best news about turning 60. You’re going to be happier. “As you get older, you know that bad times are going to pass,” said Laura Carstensen, PhD, director of the Stanford Center on Longevity, Stanford, California. “You also know that good times will pass, which makes those good times even more precious.”
You don’t need anyone telling you that money can’t buy happiness (or prevent sadness),38 but it certainly can make your retirement years more fulfilling and comfortable. Proper financial planning sets the stage for a smooth transition to those autumn years.
Getting Financial Advice
You’re approaching a major turning point in your life. A financial advisor can help you discover wise solutions and develop smart retirement strategies for a rich and exciting future.
If you or anyone close to you would like to discuss how to maximize your retirement benefits with a professional, please give our office a call at 303-741-9772.
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Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Dechtman Wealth Management, LLC [“DWM”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from DWM. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. DWM is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the DWM’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.dechtmanwealth.com.
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