Planning for Retirement in Your 60s: Tips You Need to Know as You Reach Retirement Age

Written by Dmitriy Fomichenko | Edited by Eric McClure

Last Updated: December 1, 2021 References

Whether you’re 55 and thinking ahead or you’ve just entered your 60s, it’s important to take stock of your financial situation to see whether you’re ready for retirement or not. While all of this can seem incredibly daunting, rest assured that you still have time to rebalance your portfolio, set aside more money, or trim your expenses so that you can retire comfortably. Remember, everyone’s financial situation is different and if you need help, you should meet with a financial or retirement advisor to get personalized help.

This article is based off an interview with our financial planner, Dmitriy Fomichenko, president of Sense Financial Services. Check out the full interview here.

Method 1

Method 1 of 12:
Set a target to spend 60-110% of your yearly income in retirement.

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If you want to maintain your current lifestyle, this is how much you’ll need. Nobody says you have to maintain your current lifestyle, though! If you want to live lavishly, raise your target to 100-110% of your yearly income right now. Plan on taking it easy? You can drop it to 60%. The average American spends 20 years in retirement, so here’s what that might look like for you:^{[1]
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Trustworthy Source
US Department of Labor
Federal department responsible for promoting the wellbeing of workers
Go to source}
- Let’s say you and your spouse make a combined $120,000 a year right now, and you think you’ll need 90% of that every year. That brings us to $108,000 a year. Plan on spending this targeted amount every year in retirement.
- Maybe you’re both in super good health and you plan on making it another 25 years. Multiply that 90% figure by 25 to get $2,700,000. This is your target price for retirement savings.
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Method 2

Method 2 of 12:
Find out when/if you’ll start receiving Social Security.

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Expect to receive ~$1,500 a month in Social Security if you qualify. You can start receiving Social Security at age 62. The longer you wait to begin withdrawing Social Security though, the higher your monthly payout may be.^{[2]
X
Trustworthy Source
US Social Security Administration
Independent U.S. government agency that administers Social Security and related information
Go to source} You can only find out exactly how much you’ll get for Social Security once you apply, but the average payout is around $1,543 a month.^{[3]
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Research source} You can also use the Social Security Administration’s calculator to estimate how much you’ll receive.^{[4]
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Trustworthy Source
US Social Security Administration
Independent U.S. government agency that administers Social Security and related information
Go to source}
- The younger you are right now, the less you should depend on social security being there for you. There’s a funding crisis with Social Security, and the less you need to rely on it, the better.^{[5]
  X
  Expert Source
  
  Dmitriy Fomichenko
  Financial Planner
  Expert Interview. 28 June 2021.} If you’re close to retirement now, you should be fine, though.^{[6]
  X
  Trustworthy Source
  US Social Security Administration
  Independent U.S. government agency that administers Social Security and related information
  Go to source}
- Some people will not be eligible for Social Security benefits. If you haven’t worked enough over the past 40 years or you emigrated too late in life, you may not qualify.^{[7]
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Method 3

Method 3 of 12:
Calculate how close you are to your target.

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Add up how much you’ll be able to withdraw once you retire. Take all of your savings and retirement accounts, combined with your estimated social security payments, and add them up. Take any pensions you’ll be paid out into account as well. Then, compare this number to your target savings number to see how close you are to your savings target.^{[8]
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Expert Source

Dmitriy Fomichenko
Financial Planner
Expert Interview. 28 June 2021.}
- Let’s look at an example. If your target is to save $2,700,000 for retirement and you’re only at $800,000 by age 45, you have 17 years to save $1,900,000. Assuming you want to retire at 62, that comes out to roughly $111,000 a year.
- There are a lot of online calculators that you can use to calculate your ideal savings target for retirement. You can find a simple option at https://investor.vanguard.com/calculator-tools/retirement-income-calculator/.
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Method 4

Method 4 of 12:
Plan to draw down 4% of your savings per year.

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While you may not need to, you should have enough to draw down this way. The draw down refers to process of withdrawing everything you’ve saved over the years. The goal is to use your income from pensions, dividends, interest payments, and social security to live comfortably so that you don’t have to touch your savings. However, if you hit your target and have zero income coming in, you should be able to draw down roughly 4% of your savings every year without risking the stability of your nest egg.^{[9]
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- So, let’s say you plan on spending $108,000 a year in retirement. That’s $9,000 a month. You estimate that you’ll get $1,500 a month in social security, you’re getting $1,200 a month in dividend payments from your IRA, and your pension will pay you $1,500 a month.
- That’s a combined $4,200 a month in income. That leaves you $4,800 behind per month, or $57,600 a year.
- Now, assuming you have to draw down that $57,600 from your savings, if you currently have $800,000, that’s 7%. You’re only 3% off from your target! To hit your 4% goal (the number where it won’t impact your savings), you’ve got a little bit of saving to do. It’s not a monumental gap, though!

Method 5

Method 5 of 12:
Keep working if you need additional income.

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You can always work part- or full-time if you’re coming up short. If you need the income in retirement, continuing to work may be a great way to make it up. There are other benefits as well. If your health insurance is tied to your employment, continuing to work is a great way to save the extra expense.^{[10]
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- A lot of people prefer to keep working at least part-time in retirement. Some people enjoy having something to do, and you may feel more productive if you have a gig to put your energy into!^{[11]
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- Using our previous example, you could theoretically retire now on $800,000 so long as you’re making at least $4,800 a month.
- If you plan on receiving social security, make sure that you look up the yearly income limit. If you make too much money, you won’t be able to accept that social security payout.^{[12]
  X
  Trustworthy Source
  US Social Security Administration
  Independent U.S. government agency that administers Social Security and related information
  Go to source}
- Retirees often work as teacher aides, substitute teachers, restaurant hosts, tour guides, ushers, babysitters, and dog walkers.^{[13]
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Method 6

Method 6 of 12:
Save as much as you possibly can before you retire.

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The more you put away now, the bigger your payout will be in retirement. If you hit your retirement target early, save more to give yourself some breathing room! If you’re short on your target, bumping your savings up may help you hit your goals. Make saving money your #1 priority in the decade or so leading into retirement.^{[14]
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Trustworthy Source
US Department of Labor
Federal department responsible for promoting the wellbeing of workers
Go to source}
- You can start saving more money by cutting back on vacations, eating at home more often, and taking it easy on the shopping trips.^{[15]
  X
  Trustworthy Source
  Financial Industry Regulatory Agency
  Non-governmental organization responsible for regulating brokerage firms and exchange markets
  Go to source}
- If you’re over 50, your IRA maximum contribution is actually $7,000, not the $6,000 you may be used to. Don’t forget to stash that extra $1,000 away every year!

Method 7

Method 7 of 12:
Develop a plan for long-term care, even if you don’t need it yet.

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Half of people over 65 will have a long-term care cost at some point. Unfortunately, the costs add up quick if you aren’t prepared. Even if you don’t need care now, develop a plan with your family. Are you going to live with your kids? Is a nursing home a potential option? If you can, consider setting aside an extra $100,000-250,000 for long-term care costs (that’s lump sum—not per year). If you can’t, talk to an insurance agent about long-term care insurance.^{[16]
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- The average yearly cost of a private room in a nursing home is a little over $100,000. At-home health aides will run roughly $50,000 a year. You’ll need to save an extra $900,000+ if you want this kind of high-end care for ~18 years (the average length of retirement).
- If you have children, bring them in on this conversation. Talking about this one as a family is often helpful, especially if your children have mentioned helping you out.
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Method 8

Method 8 of 12:
Free up capital by resolving debts and selling assets as needed.

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Getting your expenses down is key to preparing for a stable retirement.^{[17]
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Expert Source

Alan Mehdiani, CPA
Certified Public Accountant
Expert Interview. 9 July 2020.} Got a lake house you never use that you’re not going to retire in? Sell it! Are you paying a ton of interest on a credit line? Close it! Making a handful of bigger financial moves now may be a great way to give your savings a bump or free up some of your cash flow.^{[18]
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- If you are carrying a ton of unsecured debt, clearing that off of your books is mandatory if you want to adequately prepare for retirement. Start working now to pay that debt off as fast you can.
- If you have a large stake in a business or investment venture and the future returns aren’t going to dramatically increase, you may want to consider selling to move into cash if you need to increase your savings or pay off a large debt.
- If you have a vintage car, a bunch of collectibles, or some other expensive item that you really don’t need to hold on to, selling them may be a good way to bump your savings.

Method 9

Method 9 of 12:
Pay off your home to clear your biggest expense.

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Getting rid of a mortgage can have a huge impact on retirement. For a lot of folks, housing is the biggest expense they have. If you can pay your home off entirely before you retire, you can take a lot of pressure off of your monthly cash flow in retirement, since you won’t need to pay a mortgage. If you’re able to pay your house off, sit down and determine if it’s going to be worth it for you do that early.^{[19]
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- If your interest rate is outpacing the rate of return in your savings account and retirement portfolios, you’re probably best off paying the house off early. For example, if you’re paying 6% on your mortgage but you’ve only been getting 3-4% in your investment portfolios, paying the house off will save you money over time.
- If you’re outpacing the interest rate on the loan with your returns in the market and/or savings, then completing the life of the loan may be better for you.
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Method 10

Method 10 of 12:
Rebalance your portfolio to include safer investments.

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The closer you get to retirement, the less risk you want in the market. Depending on market conditions, you likely want to start shifting away from stocks and growth-oriented funds, and more towards fixed income assets. Trade out your riskier stocks for bonds, CDs, and other fixed income assets so that you remain diversified. This way, you can continue to grow your portfolio without losing your retirement savings in the event of a market crash. Talk to a financial advisor if you need help here.^{[20]
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Trustworthy Source
US Social Security Administration
Independent U.S. government agency that administers Social Security and related information
Go to source}
- There is no universal formula for this, but one method is to start with 100 and subtract your age. That number is what your stock allocation should be. So, if you’re 55, you may want a portfolio that’s 45% stocks, and 55% bonds and fixed income assets.^{[21]
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- If you do want to maintain exposure to stocks, your safest bet will likely be broad-index mutual funds.^{[22]
  X
  Expert Source
  
  Dmitriy Fomichenko
  Financial Planner
  Expert Interview. 28 June 2021.}

Method 11

Method 11 of 12:
Develop a drawdown plan for your investments.

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As you get closer to retirement, figure out where you’ll divest first. If you have any target date funds, this will happen automatically. However, coming up with a plan on how you’ll pull your investments out is essential. Some people plan on drawing down savings and then replenishing the savings with gains from their investments. Other people prefer selling their most volatile assets first and preserving their savings. Work with a financial advisor to determine how you’ll trim assets to supplement your income.^{[23]
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- Some people opt to live entirely off of dividends. If you have $1,500,000 in your portfolio and you’re getting 9% a year in dividend payments, you could live off of that $135,000!^{[24]
  X
  Expert Source
  
  Dmitriy Fomichenko
  Financial Planner
  Expert Interview. 28 June 2021.}
- Passive income from fixed rate investments can help you minimize how much you need to drawdown as well.^{[25]
  X
  Expert Source
  
  Dmitriy Fomichenko
  Financial Planner
  Expert Interview. 28 June 2021.}
- In most cases, you should liquidate your riskiest and most volatile investments first. This way, if the market enters a downturn, your portfolio won’t suffer any giant moves.
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Method 12

Method 12 of 12:
Meet with a retirement advisor to get advice.

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If you need assistance with your finances, get professional help. Everyone’s situation is unique, and you may have assets, liabilities, or investments that you need help navigating. Meeting with a retirement advisor and reviewing your financial situation should dramatically help you navigate your 60s as you prepare to finally retire.^{[26]
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- This is especially important if you aren’t actively managing your own finances and you aren’t sure whether you’re on the right track or not.

Community Q&A

Question

How can I pay less taxes when I retire?

Alan Mehdiani, CPA
Certified Public Accountant
Alan Mehdiani is a certified public accountant and the CEO of Mehdiani Financial Management, based in the Los Angeles, California metro area. With over 15 years of experience in financial and wealth management, Alan has experience in accounting and taxation, business formation, financial planning and investments, and real estate and business sales. Alan holds a BA in Business Economics and Accounting from the University of California, Los Angeles.

Alan Mehdiani, CPA

Certified Public Accountant

Expert Answer

Before you retire, try and reduce your expenses. This will lower your cost of living and will reduce the amount of money you take out from your retirement accounts each year. So the less that you take out of your retirement accounts, the less you're going to pay in taxes. For example in 2020, if you're married and filing your tax returns jointly, try and keep your income under $80,250, you won't pay more than 12% in income taxes to the IRS.