You want time to enjoy life after retirement, even if you choose to work into your late sixties. You probably have peers who have been enjoying retirement, and now it’s your turn! But before you say goodbye to full-time employment, you should take the following steps to ensure your finances are in order. 

1. Establish a Budget

No matter your age, you shouldn’t retire until you’ve set up a budget for this next chapter of your life. You know your financial situation will look different, so proper planning is the best way to be successful. A simple way to set a retirement budget is to come up with a total monthly spending amount, just like Bob and Ellen saw in the example in our lesson entitled, “How Long Your Savings Will Last By Budget.” As you work on your budget, you can compare it to your Retirement Score to get an idea of how long your savings will last based on your monthly budget.

Without any additional money coming in, like end-of-year bonuses, holiday payouts, or extra paycheck months, your budget for your retirement years should cover absolutely all of your expenses. That means you’ll need to factor everything from large expenses like healthcare, and smaller ones that can sneak up and bust your budget, like cost-of-living adjustments. It’s always good to live below your means so you can build an extra cushion for unexpected expenses. At Silvur, we recommend nailing your budget down at least six months before you stop working so that you can take the final six months of your employment to test-drive your budget and make tweaks wherever necessary. 

2. Maximize Contributions to Retirement Accounts

In the years prior to retirement (if you haven’t been doing so all along), you should make sure you're maximizing employer-sponsored retirement plans that may be available to you (i.e. 401(k) plans, a 403(b), etc.). Doing so can help you make the most of your final years of retirement growth, but don't forget that contributing to tax-advantaged retirement accounts can also lower your taxable income.

How much can you save? That depends on the type of retirement plan you're using. And keep in mind that the maximum amount is typically increased every few years. As an example, the maximum deferred contribution for a 401(k) plan in 2024 is set at $23,000. And with the recent passage of the Secure Act, you can now continue to save in either a traditional or a Roth IRA, and even a 401(k),  regardless of age. Previously, the upper age limit for contributions to these accounts was 70 ½.¹

Note: If you're self-employed, you'll also want to maximize any tax-advantaged retirement plans you may be using, such as a SEP IRA or a Solo 401(k).

3. Utilize Catch-up Contributions

Anyone age 50 or older (with no upper age limit) can boost contributions to certain retirement accounts with what is known as a "catch-up contribution." With catch-up contributions, you can contribute an additional $7,500 to a 401(k) plan in 2024, for a total contribution of $30,500 each year. This is crucial to remember if you’re approaching your target retirement age but feel like your savings amount is lagging behind.

4. Contribute to IRAs or individual accounts  

You can also contribute to an IRA in addition to other retirement plans. In 2024, the basic contribution limit to both a traditional IRA and a Roth IRA is capped at $7,000, although individuals ages 50 or older can contribute an additional $1,000 in catch-up contributions for a total annual limit of $8,000.²

5. Cut Expenses

As you plan to retire between ages 65 and 70, keep in mind that the amount of assets you need is directly correlated to how much you spend. Generally speaking, this means you can retire earlier if you can find a way to cut your expenses. 

How can you spend less each month? Consider these tips:

• Keep unsecured debt (i.e. credit card debt) at a minimum
• Use a monthly budget or spending plan and stick to it. Do a dry run for a few months and see what you need to adjust or tweak. 
• Create a food plan and grocery list each week
• Compare cable and phone plans to find the best deal
• Use public transportation instead of driving
• Take advantage of discounts for seniors, like prescription drug cards that can help pay for medication. 

6. Choose the Right Healthcare Plan

Affording healthcare before Medicare kicks in is difficult, which is what makes 65 such a great age to retire - you’re finally eligible for Medicare three months before you turn 65. Be sure to do your research on the program before you retire, so you can ensure you sign up for the parts you need most (and on time - penalties apply for late enrollment!). Even if you don’t yet need much medical coverage, or you’re considering delaying because you’re covered by your younger spouse who’s still working, you’ll need and want Medicare at some point, so it’s good to know as much as possible. 

If you’re planning your Medicare enrollment strategy, don’t forget to complete our Medicare classes in the Retirement School. There, we lay out all the different parts, the costs, and the rules you need to know before you enroll. 

7. Estate Planning

Estate planning is an incredibly broad subject to broach when you're looking forward to retirement, yet there are some simple steps nearly everyone should take. For example, you should plan to:

• Take an inventory of your possessions and create a basic will and testament
• Choose an executor you trust to follow your final wishes
• Update beneficiaries on your retirement accounts, bank accounts and life insurance policies 
• Create a living will that dictates what happens to you if you're alive but not longer able to speak for yourself
• Pre-plan for your funeral and final disposition

While you can hire an attorney to help you write a will and testament as well as a living will, it's possible to take care of some of this on your own using an online tool that provides legal documents. While having a will does not necessarily mean your beneficiaries will avoid probate, it does increase the likelihood of your assets being handed off based on your preferences. 

8. Look into Long-term Care Insurance and Life Insurance

Are you covered in the event of an unforeseen health crisis? It’s never too late. Long-term care insurance is expensive but can offset the high costs you’ll face if you or your partner ever needs nursing home or assisted living care. And life insurance can provide you with additional security as well. Learn more about both of these types of insurance in our classes dedicated to Long-Term Care and Life Insurance.

SOURCES

1. 401(k) limit increases to $23,500 for 2024, IRA limit rises to $7,000.” IRS.gov, 1 November 2023, https://www.irs.gov/newsroom/401k-limit-increases-to-23000-for-2024-ira-limit-rises-to-7000. Accessed 1 November 2023.
2. Ilbd.