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Financial Milestones to Reach in Your 60s

By Kelly McLean Rindock, CFP®, CLTC
Financial Advisor

Approaching retirement comes with many changes. One of the biggest come from the loss of a paycheck and needing to live off of your savings and investments.

In preparation for that change, there are a few things every person in their sixties should achieve.

1) Eliminate Debt
The accumulation of debt is a normal way to finance life's biggest purchases; a home, vehicles or a college education. However, as you approach retirement, you should simplify your finances and systematically pay off any debt that you've accumulated.

This will not only decrease your monthly expenditures, but it will increase the likelihood of a successful retirement plan. Additionally, by paying off some of these bigger items, such as your house, you are giving yourself an additional pool of assets that help could fund your future goals. For most of our clients, the value in their homes will be used to secure living arrangements throughout the remainder of their lives, whether that is to downsize, move into a retirement community or an apartment. By leaving a mortgage in place prior to retirement you might be limiting your options.

2) Create an Emergency Fund
Emergency funds are an often overlooked part of financial planning. It is easy to save for the things that we know are coming in lieu of funding what may never happen. However, an emergency fund becomes even more important as you age. You have an increased risk of you or your loved one having a health related emergency that could require you to be out of work for an extended period.

Most families need emergency funds to cover 3-6 months' worth of living expenses. As you age, you have less time to replenish any savings or retirement funds needed if an emergency should occur. An emergency fund should be kept liquid in a savings account. Without an emergency fund, something as simple as a broken limb or needing a new roof can be disastrous to your financial health and force you to make decisions you wouldn't otherwise.

3) Maximize Savings
It is never too late to start saving or to increase the percentage you do save. As we get older, most people tend to earn more and have lower expenses; this lends itself to be able to save more.

In 2016, anyone aged 50 or older can save up to $24,000 per year in their 401k. Although there are many options in which to save funds, it is hard to match the power of this tax deferred saving each year, not to mention your employer's contribution. This doesn't mean that you need to reach this number each year, but, each year you should strive to increase what you are saving.

There are many statistics out there that show most baby boomers in general have saved very little towards retirement and believe social security will fund their retirement goals. Every dollar you can save will help you absorb inflation costs and fund the unexpected.

4) Learn to Set a Budget and Live Within Your Means
Baby boomers are often called the sandwich generation as they are still helping to care for their adult children and also their parents. This can be a huge financial stressor. Learning to set a budget and live within those parameters will help you navigate your financial future and make tough decisions when you are on a fixed income.

One situation that we see fairly often is a "parent" approaching retirement or just into retirement who is trying to find money to pay for their lives, their own parents care, and also attempting to fund things their children are unable to afford for themselves. Few people are able to do this successfully.

I hear often that they "want to help" and are more worried about others than their own future. However, this can cause irreparable damage to their ability to fully fund their own needs in retirement.

5) Create a Financial Plan for Retirement
Too often people come into my office who have already retired, then they ask the question "Can I afford it?" The time to ask that question is as early as possible. More often than I would like to, I have to tell people that the standard they wanted to live in, is not feasible, or that they need to go back to work to achieve their goals.

I suggest that most people in their forties have a beginning plan towards retirement as the more time you have prior to your goal the more time to amend your behavior to allow you to achieve it. Obviously, the plan will change as you change but you should start to discuss it sooner rather than later.

There is no magic number or set recipe to achieve a successful retirement. However, having a plan that is unique to you and your situation is paramount. Without one, how do you know where to aim? Or what decisions are best for you?

6) Simplify
Finances are complicated. They are even more complicated for those who have not participated in the original decisions. It is common to have different checking and savings accounts, personal investments, multiple retirement plans, or insurance policies at multiple institutions.

Although you may know where everything is, and how it works together, does your spouse know? Would your children or the executors of your estate know? Would they know who to contact if something happened to you?

In addition to creating your financial plan, we often suggest reviewing all insurance policies and combining accounts to one institution.

It allows for the advisor to give you a well-rounded view of your entire situation and ensure there are no gaps or duplications in your efforts. Additionally, simplification can mean creating a binder to house all pertinent information for your loved ones. Copies of important legal or financial documents, contact information for their advisors, or where to locate a safety deposit box.

Views expressed in this newsletter are the current opinion of the author, but not necessarily those of Raymond James & Associates, and they are subject to change without notice. Information contained in this report was received from sources believed to be reliable, but accuracy is not guaranteed. Past performance is not indicative of future results.

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