The financial planning process for people in their 70s is different from any other stage, yet remains an essential component for overall financial health.
By the time you reach your 70s, you may be retired or you may be working full- or part-time hours. Either way, financial planning remains central to supporting yourself over the next 10 to 20 years.
Let’s take a look at how financial plans may differ for retirees and those who remain in the workforce.
One major difference in a retiree’s financial plan is the absence of employment income. If you are retired, then you may be receiving part of your monthly income from social security. You may also receive payouts from investments, and distributions from 401(k) and IRA retirement accounts. Whatever your arrangement, you have likely determined (prior to now) what your living expenses might be and what it takes to maintain a comfortable lifestyle.
However, just because you may have planned your retirement ahead of time does not mean there is no room for improvement. In fact, we often recommend that as part of a financial plan for retirees in their 70s, to take a look at their net worth once a year. This can be done by subtracting liabilities (such as car payments and mortgages) from assets (income, investments, etc.). Compare your net worth from year to year, and you can get a basic sense of whether or not you are living below or above your means.
One of the biggest challenges for retirees is balancing how they spend their money in retirement. If you spend too much money early on, there may be less to work with in your 80s and 90s – a time when you may need more cash for medical care or emergencies. If you spend too little, you may be living less comfortably without reason.
On the flip side, there may be more ways to save money in your 70s. Checking your Medicare Part D coverage every year is one way to ensure you are not paying too much for prescription drugs. Open enrollment begins October 15th every year and runs through December 7th.
Finally, the financial planning process in your 70s may include an estate plan. You may have begun this process already, but now you may want to look at how you can manage the assets found in your taxable estate. If you plan to leave an inheritance for your children or spouse, then now is an opportunity to help them plan for estate taxes upon distribution.
If you are in your 70s and still working (many are, by the way), then you have the advantage of generating additional income for retirement. Individuals who delayed financial planning until later in life can benefit from working later, too.
For example, it is possible you do not have to take the required minimum distributions from retirement accounts if you are still working, so that money can continue to be invested until you retire.
The benefits for employees are twofold: generate additional income and maintain investment in retirement accounts.
Of course, individuals who continue to work at this stage in life may need to be careful not to overspend, and to keep their sights set on saving and planning for retirement. After all, it is likely not too far off at this point. Performing a net worth assessment (described above for retirees) is also a good idea for employees.
While you are working part- or full-time hours, you may want to take a closer look at what your daily expenses are right now. Consider which items may not be relevant in retirement, such as gas to get to work, vehicle maintenance, eating out for lunch, business clothes, and so forth. This will help you get an idea of how much money you need every month, so that you can start putting away enough of your current paychecks. If you are working, then you may not need to apply for social security until later, which means you can claim more each month.
Like retirees, you may also want to look at your estate plan to determine how to reduce the tax burden for those who will receive an inheritance upon your passing.
Whether you are in the workforce or not, maintaining a solid financial plan in your 70s is essential to covering all of your expenses – expected or not – as you grow older. You may want to speak with a financial planner who can show you how all of the financial pieces fit together to influence spending and saving throughout the rest of your lifetime.
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