What Should You Do When You Turn 65?
Along with more birthday candles on your cake, each passing decade brings varying financial consequences that require more preparation for your future. It’s a given that you want to enter retirement with confidence and excitement (we all do!)—but that doesn’t happen by chance.
The trouble is that retirement planning can get confusing, and with everything else you’re juggling in life, it can be easy to miss important deadlines. To lend a hand, the following “cheat sheet” outlines some steps to take and decisions to make when you reach the pivotal age of 65. So if you’re facing your 60th decade, listen up!
Get On The Medicare Train
Medicare eligibility begins at age 65. If you are already receiving Social Security, you will automatically receive Medicare too. But if not, you will need to manually apply for Medicare benefits. You can sign up as early as three months before your 65th birthday so that your coverage begins as soon as possible.
There are plenty of Medicare choices to make, such as what type of coverage to apply for, whether you want a prescription drug plan, and if you need supplemental insurance. Your premium costs will depend on your coverage choice and your income. Medicare can be complicated and overwhelming, so start researching now to make informed choices.
On the other hand, you aren’t required to apply for Medicare. Depending on your situation, you may be better off postponing your Medicare enrollment, especially if you plan to continue working and your employer’s healthcare plan is cheaper than what your Medicare Part B premiums would be. If this is the case, you can still enroll in Part A. It’s free in most circumstances, covers hospital-related expenses, and can supplement your employer’s plan.
Figure Out Social Security
If you have yet to tap into Social Security, be mindful of the fact that 65 is not quite full retirement age (FRA). If you were born between 1943 and 1954, your FRA is 66. Starting in 1955, two months a year is added again until the FRA becomes 67 for those born in 1960 or later. If you want to maximize your Social Security benefit, you’ll need to wait a bit longer before claiming Social Security. Regardless, turning 65 is a good time to get the details in place and paperwork ready to start collecting your benefits. If you are still working or don’t need the money to cover living expenses, you can delay receiving your benefits until age 70.
Keep in mind that the income you earn in the year before FRA and the year you reach FRA will impact your benefit amount. Any income you earn before the year in which you reach FRA reduces your Social Security benefit once it surpasses a specific limit. For 2021, the limit is $18,960. Once your earnings exceed that, your Social Security benefit will be reduced by $1 for every $2 you earn. The income restrictions change the year you reach FRA. That year there is a higher limit, which is $50,520 for 2021. Your Social Security benefit will be reduced by $1 for every $3 you earn once you pass that limit.
Creating a Social Security strategy will help you determine the best time to claim benefits and guide you in making decisions about how much to work in the years leading up to your full retirement age.
Consider Long-Term Care Insurance
More than half of people turning 65 will need some form of long-term care during their lifetimes; that’s why it’s critical to have a plan to pay for these costs. (1) On average nationally, it costs $290 per day or $8,821 per month for a private room in a nursing home. (2) But the older you get, the higher your cost for a long-term care insurance policy will be and the greater the likelihood of your application being denied. Generally, the last age long-term care insurance is affordable is when you are in your mid-60s.
Cover Your Legal Bases
Although age 65 is far from the end of your life, as you get older and your health risks increase, it would be wise to use this milestone to get your affairs in order so your family is taken care of. Consider drafting a will, finding a power of attorney for your finances and health, and creating an advanced medical directive in case you cannot make decisions on your own.
Create A Savings Withdrawal Plan
When you do start living off of your hard-earned savings, you need a plan in place to help insure your money lasts through your retirement. You don’t have to start taking required minimum distributions (RMDs) from your IRA or 401(k) until you are 70?, but you may want to withdraw some money now to lessen the tax impact later. The key is to sit down and map out multiple scenarios to reduce your tax bill, make your money last as long as possible, and enjoy your future retirement with less worry.
We’re Here To Help
Are you feeling overwhelmed about planning for retirement or figuring out how to manage your finances at this life stage? Partnering with an experienced professional can help.
While working with a financial advisor can be beneficial at any time, receiving objective advice and personalized guidance can be especially helpful as you approach your career finish line and enter the next chapter in life. Our 1on1 Financial team can help you evaluate your goals, analyze your options, and come to decisions you will be happy with for a lifetime.
Our goal is to make it easy for you to understand the steps you need to take to achieve your retirement dreams. If you could use an expert guide during this pivotal season of life, call our office today at 909-981-1720 or simply click here to schedule a free 15-minute introductory phone call today!
About 1on1 Financial
1on1 Financial is an independent financial advisory firm specializing in guiding working and retired professionals, executives, and business owners along the path to financial well-being. Founded in 1997, we use a team approach to help our clients accumulate wealth, generate income, preserve their life savings, and strategically plan for the distribution of their estate. With more than 50 years of combined experience in the financial services industry, we remain true to our fundamental mission: to provide personalized guidance, treatment, care, and service so our clients can gain control of their future and feel confident in their financial life.
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(1) https://www.morningstar.com/articles/879494/75-mustknow-statistics-about-longterm-care-2018-ed
(2) https://www.genworth.com/aging-and-you/finances/cost-of-care.html