In previous posts in our investing series, we gave you pointers on investing in your 20s and 30s and also in your 40s and 50s. In our third and final installment, we’ll share some investment tips in your 60s and 70s.
Your 60s and 70s are an exciting time. They’re, typically, when you get to reap the benefits of the nest egg you’ve worked so hard to build over the decades. You’ll want to keep a close watch on your retirement savings to make sure you can afford your preferred lifestyle.
Set a Target Date
You may be nearing retirement, so it’s time to home in on a specific retirement target date. Because that date is likely in your near future, you can set a realistic, detailed budget for your expenses and lifestyle. To err on the safe side, plan to live off your savings for at least 20 to 30 years.
Your target date depends on a number of things: how much you currently have saved, if you plan on working part-time, where you’ll be living during your retirement and your ideal standard of living. If you can afford to retire early, is early retirement right for you? Are you set to be a globetrotter and live lavishly? Or are you perfectly content enjoying simple pleasures? By factoring in these different considerations, you can pinpoint when you can afford to retire.
Scale Back on Risky Investments
Because your timeline to invest is shorter than it was in years past, you’ll want to make sure more of your portfolio is focused on modest, consistent and predictable returns, points out Kasey Ring, president of Upward Personal Finance.
To minimize your risks, mind the rule of not having too many eggs in one basket. Make sure you diversify between stocks, bonds, cash and real estate – and between both U.S. and international holdings. You’ll also want to spread out your investments among different industries and ladder (tier) your bond maturities, adds Ring. That way, your bonds will net a greater return and the money will be available when you need it.
Create Money Buckets
Create separate money buckets for your short-term, long-term and mid-term goals.
“This takes some planning to accomplish but is an excellent way to preserve your capital,” explains Ring.
For instance, your short-term funds are invested conservatively and are designated for your emergency fund as well as any expenses that will pop up in the next few years. Mid-term funds have a moderate risk and are allocated to be tapped into during the next three to seven years. Your long-term funds are for anything beyond and are positioned for growth so you can be a little more aggressive in your investments.
Certified Financial Planner Mike Sena suggests to have three money buckets made up of the following:
- For guaranteed monthly income, which includes Social Security, pensions, income annuities and cash flow from real estate investments
- For relatively safe money that can spill into another bucket as needed
- For longer-term investments, such as stocks and real estate investment trusts; your higher-risk investments will have more time to earn a higher return
Factor in Different Tax Concerns
As you’ll be starting to take money out of your retirement funds, your tax concerns may be different than what you faced during your working years, explains Steve Martin, certified public accountant and founder of Oasis Wealth Planning Advisors.
To help minimize taxes, you’ll want to take a close look if a retirement account is tax-deferred (i.e., a traditional independent retirement account [IRA]), pre-taxed (i.e., a Roth IRA) or taxable (i.e., a pension).
“In a nutshell, your overall after-tax growth rate should be maximized while your income taxes are minimized,” Martin said.
Meet with a Social Security Representative
While you may decide to delay collecting Social Security checks when you retire, schedule a visit to your local Social Security office to figure out your optimal payout strategy, suggests Bill Losey, certified public accountant and president of Bill Losey Retirement Solutions, LLC. A representative can sit with you to figure out the best plan for you based on your retirement needs and goals, marital status, and employment and tax situation. By doing so, you can see where your Social Security benefits fits in with your retirement savings.
Find Ways to Earn Extra Cash
Many people get a late start with saving for retirement and may need to play catch-up. You may decide to look for ways to build supplemental income. You can use those sharply honed skills you’ve acquired throughout your career and use them in similar or new ways. Aside from some of the more well-known job sites like Indeed, Monster, CareerBuilder and ZipRecruiter, additional sites worth exploring are Retirement Jobs and Senior Job Bank.
Schedule Regular Reviews
The time is now to keep a close watch on your savings and investments. You’ll want to have peace of mind that you’ll have enough beans stowed away to retire comfortably. Of course, contact your financial adviser to evaluate your personal situation.
By taking these steps, you’ll be in a far better place to figure out when you’ll retire and to plan for a lifestyle that offers you the comfort and enjoyment you’ve earned.
What steps are you taking with your investment portfolio in your 60s and 70s? Let us know in the comments!
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