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Planning for Retirement at any Age

Author Greg Davis

Retirement planning isn’t only for those close to retirement. In today’s post, we’ll review essential retirement tips by age range to help you prepare, regardless of your retirement age or stage.

 

Under age 50

 

1. Imagine yourself NOT working!

You can never start envisioning your retirement too soon or obtain advice for retirement too early. Even if you think your goals might shift in the years ahead, dreaming about them today gets the conversation started and helps you plan. Do you want to start your own business? Or do you want to travel, volunteer, or continue working on a part-time basis? 

As best I can recall, I started thinking about retirement in my late 40s. My wife and I were well established in our careers at that point with the stress that accompanied increased responsibility. At the time, I figured we would work until age 65.

 

2. Start preparing for retirement early.

Once you know what you want to be doing, it is time to figure out how much you need to achieve it. Run some numbers with your financial advisor or use a Retirement Planner website. Let’s say you are 35 years old, earn $100,000 a year, and have $200,000 in your 401(k). You might determine you need $2 million saved up by the time you are age 65. To get there, you need to invest $550 per month and earn a 7% annual rate of return.

My wife and I started collaborating more closely with our financial advisors in our early 50s, running various retirement plan scenarios. This was extremely helpful to have a game plan in place.

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3. Save money at every chance.

With rising retirement costs and people living longer, there is a chance you will need a lot more money than you think in retirement. Thus, saving as much as possible during your high-earning years is critical. 

While we still experienced an enjoyable life with vacations and dining out at restaurants, we ensured we were saving properly and maxing out our company-sponsored retirement plans. Experts recommend saving 10 to 15 percent of your pretax income to enhance your retirement funds. This targeted annual savings goal includes any employer match from your company 401(k) plan.

 

4. Go beyond the workplace with IRAs.

There are other tax-savvy ways to save for retirement, too. Consider opening a Roth IRA, which allows for after-tax savings and tax-free withdrawals when certain conditions are met. This can help you hedge against the possibility of future tax increases, so you do not need to worry as much about taxes during retirement.

We have used Roth IRAs to increase our retirement savings. If you are over the income threshold, increase your savings with a “backdoor” Roth IRA. A backdoor Roth IRA allows high-income earners to convert pretax contributions into a Roth IRA. They can do this by contributing to a traditional IRA and then converting it into a Roth IRA.

 

5. Consider insurance to help reduce your worries.

Even if you build a smart saving and investing strategy, unexpected events can and WILL occur. You could experience an illness that prevents you from working and earning an income. Or your home could be damaged in a storm. You need to protect yourself against the many risks in today’s complex world. Your financial advisor can help evaluate your personal situation and determine the right insurance protection levels.

We collaborated closely with our advisor to ensure that we had the proper insurance coverage on our primary assets (e.g., home and cars). This included disability insurance, which covers our most lucrative asset: the ability to be healthy enough to ensure future earnings in our careers.

 

Age 50 – 64

 

1. Add additional details to your dreams and goals.

Start planning for the dreams you have had for many years. You may have decided you will spend your retirement years traveling, volunteering or becoming a professional grandparent. Contact your financial advisor and get specific on what that will look like. Now that you are closer to retirement, you can start thinking tactically to ensure your dreams and goals become your retirement reality.

As explained in my book, after the premature death of our 48-year-old friend in 2011, my wife and I decided to reevaluate our priorities. My wife was a busy pathologist for a regional hospital in Pennsylvania, so we decided to exit our high-stress jobs and move into an early retirement phase. This would allow us to spend more time together and do things we felt were beneficial to others, like teaching and volunteering.

The stress and long hours of our busy careers became harmful to our health. While we were both making a good income, we hoped this was the change and fulfillment our life needed. I had become a bit burned out in the hectic corporate world, even though I loved the company and my coworkers. My wife felt the same in medicine, with even longer hours and higher stress than I had. Unfortunately, it took the untimely passing of our dear friend, Frank O’Connell, to lead us to another path in life.

 

2. Consider consolidating retirement accounts.

By now, you might have three, five, or even ten retirement accounts floating around due to the myriad of jobs we have switched between in our careers. But it can be hard to invest correctly and manage so many accounts. It might make sense to consolidate before retirement so you can more easily and effectively tap your money when you need it. Work with your financial advisor to determine the appropriate plan of action for your various accounts, and start preparing a game plan for how you will tap them in retirement.

We started this retirement account consolidation mode in 2014 after moving into a pre-retirement phase, where I began working my dream job as a college professor. My wife was dealing with a myriad of family health issues, which included her mother’s stroke as well as her own about with breast cancer.

 

3. Mind your health.

Do you think healthcare costs are high today? Wait until retirement. Fidelity estimates that a 65-year-old retired couple will need $300k to spend on health care over the course of their retirement. Medicare only covers a portion of the costs and may cover even less in the future. 

Work with your financial advisor to figure out how you will cover rising healthcare costs and consider funding a health savings account. Some employers offer them as part of their health plans, but you can also set one up yourself if you buy individual health insurance. Your or your employer’s contributions to a health savings account aren’t typically considered taxable income, and withdrawals are not taxed as long as they pay for eligible medical costs.

Heart disease is the leading cause of death for people of most racial and ethnic groups in the United States. High cholesterol, high blood pressure, and smoking are key risk factors for heart disease. Coming from a family with a history of heart disease, I am currently on medication due to meeting two of the three risk factors (since I am not a smoker). My wife and I try to stay active by walking, bicycling, and going to the gym as we both realize how important health is to our enjoyment in retirement!

 

4. Don’t ignore long-term care.

According to the Department of Health and Human Services, about 70% of Americans who reach age 65 will require long-term care at some point. While you are in your 50s and early 60s, consider purchasing coverage that could pay for the cost of a lengthy stay in a nursing facility or in-home care. It’s better and cheaper to lock in premiums while you are younger.

While my wife and I were both garnering higher salaries before entering our pre-retirement phase of life, we worked with our advisor to buy long-term care insurance through a single premium paid upfront. I had heard too many horror stories about how annual premium increases had impacted other couples’ ability to maintain their long-term care insurance. 

 

5. Re-evaluate how you invest.

How you invested when you were in your 40s may not be how you should invest at 50 or 60. Priorities change, and you need to start focusing on preserving your wealth as much as growing it. Talk to your financial advisor about how you can build a complete strategy to help you feel more confident about living the life you want in retirement.

We have maintained an aggressive approach to our investment portfolio, keeping a healthy mix of stocks and fixed-income investments.

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Age 65+

 

1. Review your retirement goals.

Continue to meet with your financial advisor to review your retirement goals and assess your portfolio. If needed, your advisor can help you make any adjustments to align with your retirement needs.

In December of 2024, I will hit age 65 as I plan for my wife and I to sit down with various advisors to prepare for switching to Medicare. As this tip indicates, it’s important to continue reviewing your retirement goals and plan accordingly for your post-65 years. 

 

2. Establish a spending plan.

As discussed in a prior POF article, according to one retirement rule of thumb, retirees should look at tapping into about 4% of their savings annually. But that is just a rough guideline and one that does not consider variables such as the age at which you are retiring and whether your income needs will change as you age.

While the above 4% rule would indicate that we could spend a bit more, my wife and I are comfortable at our spending level of $12k per month. This annual spending level allows for several vacation trips each year and many opportunities to enjoy the culinary experiences offered in Philadelphia.

 

3. Make your retirement savings last.

A common mistake retirees make is shifting a substantial portion of their assets to cash and fixed-income investments. While you should consider investing more conservatively as you age — since you have less time to recover from market downturns — you don’t want your investment portfolio to become so risk-averse that it’s gobbled up by inflation. Remember, retirement can (& hopefully will!) last more than 30 years.

I have seen other couples have to scale back their retirement plans since they moved a sizable portion of their portfolio from equities to fixed-income investments. As we witnessed in 2022, inflation can pose significant problems if we become too conservative.

 

4. Prepare for the long run.

Planning for your later years is crucial. People often only plan for their early retirement years when they can travel the world or partake in their favorite activities. But those activities may not be realistic when you’re 80, 90 or 100. Your financial advisor can help you think through how you hope to spend your later retirement years and work through some scenarios.

 

5. Keep checking in with your goals and finances.

Don’t leave your retirement on autopilot. Priorities often change over the course of retirement for many reasons. Reviewing your goals periodically can help you feel more confident that you can continue to live the retirement you want and deserve

 

Final Thoughts

Retirement planning should occur well before you enjoy your retirement luncheon. Preparing for retirement can be hard, but we must also remember to enjoy it. I certainly plan to be happy in our retirement!



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6 thoughts on “Planning for Retirement at any Age”

  1. Subscribe to get more great content like this, an awesome spreadsheet, and more!
  2. Excellent information

    Curious about buying long-term care insurance, looked a few years ago and couldn’t find anything that really covered well. What long term care insurance did you find that you could do a single premium paid upfront? if you don’t mind sharing that informed

    Reply
    • Hello Mary as I’m glad to share our LTC info. We bought 2 policies for my wife/I when I was age 53 & she was 47. We paid $50k for each policy that we purchased through our financial advisor. The policy, written by Lincoln National Life Insurance Co., covers 6 years of LTC coverage and also includes a death benefit for each of us. Since she is younger, her overall benefits are better than mine. Good luck in your LTC efforts.

      Reply
  3. Excellent article and perspective.
    My wife and I are both 63 with plans to retire in December of this year(2024)

    I have seen the estimated $300,000.00 of retirees health care I am curious spending referenced in other articles.

    I am curious as to what that number means.
    Is it all expenses included in Medicare A, B and a supplemental plan?

    Just out of pocket expenses outside of medicare?

    I hope you can shed some light on my questions.

    My wife, son and I Spent fours days in Philly this past summer. We were there for his MBA graduation.
    It had been 25-30 years since my wife and I had been to the city

    We had some great walks and site sightseeing adventures, capped off by some amazing meals each day. I am

    Thanks again for sharing your journey

    Reply
    • Hello Paul,

      Congratulations on your son’s MBA graduation as I’m glad you were able to experience some of the great adventures here in Philly (sightseeing and amazing restaurants)!

      As far as the Fidelity health care estimate, their breakdown of the $315k cost estimate is approx. 45% for co-payments, co-insurance & doctor/hospital deductibles, 40% Medicare premiums and the remaining 15% for generics and branded/specialty drugs.

      I’ll provide the Fidelity article URL or link (including other interesting retirement topics):
      https://institutional.fidelity.com/app/item/RD_13569_42402/retirement-planning-health-care-costs.html

      Take care as I wish you and your wife a happy & healthy retirement when you retire at the end of this year!

      Reply

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