Important Financial Choices In Your 60’s

financial choices

What Financial Choices Will You Make In Your 60’s?

As you enter your 60’s retirement is getting closer all the time. Everyone’s situation is different and so their financial considerations and choices will also reflect those differences.

For example, if your kids are grown and out of college those expenses are behind you, but if you are raising a later life family or a grandchild you may still be in the thick of family activities and expenses.

No matter what your situation, you will want to think about these two areas of your financial life in your 60’s.

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Take advantage of catch-up contributions.

Once you’re 50 or over, you can contribute thousands more to your 401(k) plan than your younger colleagues. For 2012, you can contribute an additional $5,500 over the annual limit of $17,000, for a total of $22,500. Any employer contribution on top of that is gravy.

Don’t stop there. You can also make a $1,000 catch-up contribution to an IRA, for a total contribution of $6,000 in 2012. Unlike with a traditional IRA, you don’t have to take annual minimum withdrawals from a Roth once you turn 70 1/2. There are, however, income limits on Roth contributions. You’re eligible if your modified adjusted gross income is less than $125,000 ($183,000 if you’re married and file jointly).

Consider long-term-care insurance.

A well-funded retirement savings plan could be decimated in a matter of months if you end up in a nursing home or require round-the-clock home health care. Medicare doesn’t cover the cost of long-term care, and Medicaid isn’t available until you’ve spent down most of your savings.

Long-term-care insurance could prevent this from happening, but make sure it fits your budget. You’ll have to pay premiums for many years, and the cost of those premiums could increase mightily as insurers are confronted with the cost of providing long-term care to millions of aging baby-boomers, says Steve Robbins, a certified financial planner in St. Louis.

Bass says he typically starts talking to his clients about long-term-care insurance when they’re in their early sixties. Instead of a policy that provides lifetime coverage from the day you enter a nursing home, he says, consider a policy that will cover a specific period, such as up to five years. (The average stay in a nursing home is two and a half years.) Adding a waiting period — for example, 90 to 120 days — will also lower your premiums. Look for a policy with an inflation rider so your coverage will keep pace with rising medical costs.
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The “T” Word

Taxes, the word we all love to hate. They are a part of all of our lives that we cannot control and we must address each and every year.

When you enter your 60’s taxes don’t disappear. Here are some important things to think about.

Don’t Forget About Taxes

You’ve heard the saying that in life only two things are certain: death and taxes. While we don’t know when the former will come, we know that the tax man comes every year. That’s true even in retirement. The common assumption — and sometimes misconception — is that you will pay less in taxes once you have retired. That is another belief that depends totally on you, where you live and fiscal policy at the time. Your Federal Insurance Contributions Act (FICA) taxes will likely disappear in retirement, but so will many of your work-related deductions, including your 401K, health savings accounts, etc. My advice: Plan conservatively. You don’t want a tax hike in retirement to change your lifestyle.

There are many things to think about as you transition from your working years to your fun retirement years. Planning is advised; rolling the dice is not.
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What important financial choices are you making in your 60’s?

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