What to Do the Day You Turn 62
By Preston Rosamond
There are many natural milestones we reach as we go through life, everything from graduating college to making major career decisions, getting married, and having kids. But as you draw closer to retirement, milestones require some forethought and planning. So whether you are counting down the days until retirement or planning to work for another decade, here are some things to add to your financial to-do list as you celebrate your 62nd birthday.
1. Solidify Your Social Security Strategy
Just because you can claim your benefits doesn’t mean you should. If you start claiming benefits at age 62, your benefits could be up to 30% lower than if you wait for full retirement age (FRA). (1) If you delay claiming until after your reach FRA, your benefit will increase by 8% each year, with a maximum possible increase of 32%. (2) FRA is 66 for those born between 1943 and 1954 and increases by two months for every year after that you were born until it settles at age 67 for those born in 1960 or later. (3)
Regardless of when you plan to retire, turning 62 is a good time to get the details in place and paperwork ready to start collecting your Social Security benefits. 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. It’s also important to consider how long you’ve worked and your lifetime average monthly earnings, which are used to calculate your benefit. In some cases, working a few extra years can have a big impact on your monthly Social Security benefit.
Some other factors to consider are spousal benefits and spousal claiming strategies, especially if you are widowed or divorced. It may be beneficial to start claiming spousal benefits now and delay claiming your benefits until later.
Finally, remember that Medicare benefits aren’t available until you’re 65, so if you are thinking of retiring at 62, you’ll need to find alternative healthcare coverage.
2. Take Advantage of Catch-Up Contributions
If you’re not thinking about retiring just yet, consider putting more money into your retirement accounts. These next few years are your last chance to build up your nest egg for retirement. For 2021, you can contribute an extra $1,000 to an IRA for a total of $7,000, and an additional $6,500 to a 401(k) for a total of $26,000.
3. Consider Long-Term Care Planning
Don’t procrastinate on your long-term care planning. Generally, the last age long-term care insurance is affordable is when you are in your early to mid 60s. (4) 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. And why is it so important? 7 out of 10 people turning 65 this year will require some form of long-term care in their lifetime. (5) On average nationally, it costs $290 per day or $8,821 per month for a private room in a nursing home, (6) so it’s critical to have a plan to pay for these costs.
4. Plan Your Retirement Cash Flow
Creating a spending plan is a good practice no matter what age you are, but it’s especially important as you draw closer to retirement. Mapping out your expenses and income will help you visualize a few scenarios to determine if you can retire early and what your income will look like at different points in your retirement.
Playing around with the numbers helps you to see how much you’re projected to spend, as well as gives you an indicator as to how much you may still need to save until you actually retire. This would be a good time to see where you can currently cut back on your budget to increase your savings for retirement down the road.
Have you given any thought to these four tasks? It’s critical that you take them seriously so you can maximize your money and feel confident in your plans. No one wants to reach the end of their career and feel panic or regret. If you would like someone to walk you through these decisions and the many other planning considerations that come with retirement, The Rosamond Financial Group would love to help. Book a free introductory meeting online to get started!
Preston Rosamond is a financial advisor and the founder of The Rosamond Financial Group Wealth Management, LLC with nearly two decades of industry experience. He provides comprehensive wealth management and financial services to individuals, professionals, and families who enjoy simplicity and seek a professional to help them pursue their goals. Preston personally serves his clients with an individual touch, a sincere heart, and his servant’s attitude is evident from the moment you meet him. Learn more about Preston or start the conversation about your finances with him by emailing firstname.lastname@example.org or schedule a call with our online calendar.