Thanks to advances in medicine and technology, as well as an increasing standard of living, people are living far longer than they did in the 1800s – or even 1900s. However, this means that their retirement period is becoming longer as well and those who want to retire need to have saved a lot more than those a couple of decades ago.
If you are in your 60s, it is important to consider whether your money will last as long as you do.
Here are six steps to ensure financial freedom in your 60s:
- Scaling down is the new retirement
Moving directly from working a full-time job to retirement can be a very abrupt – and not all that positive – change. Additionally, because the majority of sixty-somethings are happy and healthy to continue working well into their 70s, semi-retirement is becoming a natural half-way house between full employment and the classic “full-stop” retirement.
According to a recent HSBC and Cicero Group survey, more than a third of working Americans would like to semi-retire, or cut back their hours, before retiring completely with both personal and financial reasons for preferring the gradually transition.
While a few additional years of income allow you to continue saving and investing for retirement, some level of financial independence is a prerequisite to enjoying semi-retirement as hours – and therefore income – will be cut back as the years progress.
Tip: Consider semi-retirement as a gradual transition into your full-retirement.
- Don’t always say “yes” when your kids want money
When children and grandchildren need money, the first call they make is often to grandparents. While family loans can be easy an easy way out, (no interest or collateral and easy payment terms), these loans often go unpaid.
Ultimately, lending isn’t really helpful to anyone if it puts you in a bad financial position. So, before committing to a loan, make sure you are on the right track. Ask yourself, “will this hurt my ability to reach my retirement goals or maintain my lifestyle in retirement?” before committing to a loan, which could easily turn into a donation.
Tip: Think twice before lending money to family – your financial security needs to take priority at this stage.
- Maintain your emergency fund
One can never be too prepared for those ‘unexpected’ emergencies. From a health emergencies, family crises, unexpected costs to your car or house, make sure that you have an emergency fund to cover a financial shortfall should an sudden expense crop up.
Tip: Keep some money aside for emergencies as they never come with much warning.
- Find professional help
Just as your lifestyle and interests change over time, so should your investment portfolio.
It is essential that you adapt your investment allocation to your risk appetite and investment horizon and it is also advisable to seek professional help when making any changes to your portfolio.
Read more about seeking professional help in our last blog – https://www.ecsponentlimited.com/2016/06/15/flourish-financially-in-your-50s/
Tip: In volatile markets, check your investment statements monthly and rebalance if necessary.
- Set realistic goals for your retirement
While saving for retirement is half the battle won, withdrawing from your retirement fund to provide yourself with a steady income when you stop working presents a whole new set of challenges.
Ed Slott, an individual retirement account guru and author of the retirement-planning books (“Fund Your Future: A Tax-Smart Savings Plan in Your 20s and 30s” and “The Retirement Savings Time Bomb … and How to Defuse It.”) notes that as much as 70 percent of your hard-earned retirement funds can be consumed by income, estate and other taxes.
With taxes being one of the biggest concerns, your portfolio should be structured to pay the least amount of tax as legally allowed. Developing a strategy in this regard can be challenging because most retirees draw income from multiple sources (such as a provident fund, retirement annuities and sometimes a work pension) and each of these may be subject to different levels of taxation.
So how do you approach your portfolio now that you’re no longer collecting a salary at the end of each month?
You need a steady income so, make sure you’re investing wisely and safely. When you are still working and the investment markets don’t do what you hope they will, consider working longer or postponing retirement.
Read more about what investments are most affected by tax in our blog – https://www.ecsponentlimited.com/2016/04/12/what-investments-are-most-affected-by-tax/
Tip: Develop a clear and realistic strategy to ensure a steady income for your retirement years.
- Timing is everything
Timing can influence the outcome of your investment portfolio, future and retirement significantly and a misstep can make a distinct difference to your financial wellbeing.
Just as it is advisable to gradually shift your portfolio from a more aggressive, growth-oriented allocation to a more conservative, low-risk one when approaching retirement, your timing should be ‘just right’ when you are ready to start withdrawing from your investment funds. It is always best to discuss your options in this regard with a professional financial advisor. If you have not saved enough to-date, you still have a lifetime ahead of you to keep working but on your own terms with regards to hours and days – what a pleasure!
Tip: Discuss the best time to withdraw from your portfolio with a financial advisor.