You’re in your 60s, you’ve worked hard, saved, and planned for the future. And while you don’t have to keep pounding the pavement, you still have to manage your finances carefully.
The pressure is on to protect your assets and not ruin things for your remaining years. Here are the top 10 money mistakes not to make in your 60s.
A common mistake that seniors make is taking all of the funds in their retirement account, cashing them out, and putting that money in a bank account. When you cash out your retirement account, you may have to pay taxes on that amount. It’s better to only withdraw what you need to live on, instead of the full sum.
Cashing out your retirement also means taking your money out of the stock market where it can keep growing. This means you may not have enough money to cover your expenses later on.
Many seniors believe that they should only invest in low-risk securities, but that’s not true. You should still have some of your investments in stocks and equity securities.
A safe choice is something like a total stock market index fund that tracks the entire stock market. This gives you broad exposure without tying up your money in one sector. One basic rule of thumb says you should have a percentage in stocks that’s equal to your age subtracted from 100.
For example, if you’re 65, then you can have 35% of your money in stocks and stock funds.
There’s no better feeling for a parent than being able to help out their kids. But sometimes that’s to the detriment of your own finances.
One of the most common mistakes that seniors make is giving too much money to their children, whether that means paying for their college, buying them a new car, or continuing to support them after they graduate from high school. Remember, your kids can take out loans to fund their goals but you can’t take out a loan for retirement.
If you take Social Security before the age of 66, you could wind up forfeiting thousands of dollars a year. If you anticipate living a long time, then your best bet is to delay taking Social Security for as long as possible. For each year that you delay past your normal benefits age, you’ll earn an extra 24% maximum. That's a guaranteed return that’s hard to beat.
If you can’t afford to retire without Social Security, you may want to stay in the workforce. This is another good way to beef up your nest egg.
Medicare plans can vary widely and choosing the wrong plan could mean paying much more in medical bills than necessary. When choosing a Medicare plan, you need to weigh the pros and cons.
Also, if you don’t choose a Medicare plan at the right time, then you’ll have to pay a higher premium and a late enrollment penalty.
No one likes to think about death. However, avoiding the subject can be costly. If you don’t create a will, then your assets will have to go through probate. This is a time-intensive process that can delay how long it takes your heirs to receive the money and property you’ve set aside for them. Having a will also means your heirs will not have to spend as much on a lawyer.
Not having a will can also lead to lots of family strife after you’re gone. It’s better to discuss your wishes early and often so everyone knows what to expect.
You don’t have to downsize your home as soon as you hit 60 — but it’s not a bad idea to start reconsidering your housing needs. Having a house with lots of stairs can be hard to manage later on and you likely don’t need more than a couple of bedrooms. Downsizing now could also give you more money to sock away for your golden years.
When you’re a senior, you may not be making a lot of major purchases. However, that doesn't mean you should stop caring about your credit score.
For example, you may still need to buy a car and want to take out an auto loan. To do so, you’ll need decent credit.
The good news is that you don't need to do much to maintain a good credit score. The most important factors are paying your bills on time and not using too much of your credit card limit.
If you’re worried about identity theft, you can freeze your credit. This entails calling up each of the three credit bureaus (Equifax, TransUnion, and Experian) and asking them to freeze your credit profile.
Freezing your credit ensures that no one can open a new line of credit in your name.
Every year, thousands of seniors lose tens of thousands of dollars to scams. This is a common way to erase your nest egg without meaning to.
You can try to minimize those scams by setting up safeguards, like firewalls on your computer or voice ID on your cell phone.
Also, don’t answer phone calls if you don’t recognize the number — the caller will leave a voicemail if it’s important. If you have children, ask them if you see something fishy in your email.
Whether you retire because you can afford to or because you can’t physically keep working anymore, it’s always a good idea to redo your budget. Your financial needs change as you get older and it’s crucial to compare your expenses to your income. Go through your bank and credit card statements to see how much you’re actually spending compared to how much you can afford to.
Going through your expenses might make you realize that you still need to have some source of income, even if it’s only a part-time job.
