Important Financial Milestones Every Senior Should Know

Important financial milestones for age 50 and beyond

The journey into your golden years includes several important health and financial milestones. From Social Security and Medicare to retirement and long-term care, carefully planning for your future is essential. Learn what actions are needed for these age-related milestones in your 50s, 60s, and 70s.

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Financial Milestones in Your 50s

Who hasn't dreamt of retiring to a tropical island to live a life of luxury? What we thought was possible at the age of 30 might have changed drastically as we move closer to retirement. It's crucial to devise a plan at least five to 10 years before your retirement date (the earlier, the better).

We asked Keri Dogan, senior vice president of retirement income at Fidelity, to share Fidelity's recommendations for clients in the planning phase. Dogan advises people to “create a plan and think through what their income needs are going to look like in retirement.” Dogan's number one piece of advice for those who are about five years away from retirement is to analyze your plan to see “how much you're on track to have in retirement and what that translates into in terms of monthly income.”

Clients may find this calculation challenging. “It's a hard translation for people to make from an account balance, where you have this chunk of money, to what that translates into in terms of monthly income,” says Dogan. “We recommend going through the planning process to look at all of your sources of potential income and estimating your expenses in retirement.” The bottom line? Are you on track to meet your retirement goal (covering both essential and discretionary expenses), or will there be a shortfall?

FYI: Creating a plan for retirement goals can help you feel more confident in your future. In fact, Fidelity Investments' “2021 State of Retirement Planning Study” found that people with a plan were more likely to feel confident and have greater peace of mind than those without a plan in several key areas of retirement planning.

Our 50s are a time to reassess our future needs and wants. It's also the ideal point at which to ensure your retirement portfolio is in alignment with your age and stage in life. While aggressive investments may be common in our early years, as we grow older, our investments should grow more conservative. Low-risk investments as you move closer to retirement help protect your valuable savings.

Retirement Checklist

Pro Tip: Want to learn more about just how much money you'll need in retirement? Head to our guide to retirement savings to learn more!

Play Retirement Catch-Up

If you're behind on your retirement goals, there's excellent news for those ages 50 years and over. In addition to your standard retirement contributions, the IRS allows annual catch-up contributions.1 Each year, you have the ability to contribute the following amounts based on your retirement plan:

  • Contribute an extra $1,000 to your IRA
  • Contribute an extra $3,000 to your SIMPLE 401(k)
  • Contribute an extra $6,500 to your 401(k) or 403(b)

Reduce or Eliminate Your Debt

Part of your retirement plan should include setting a goal to pay down or eliminate debt. Mortgages, personal or car loans, and credit card debt can wreak havoc on our future fixed income. According to Experian, the average personal loan balance among consumers in their 50s was $18,390.2 Create a debt-reduction strategy by compiling all debt balances and annual percentage rates. Having a clear picture of where you stand financially helps you effectively tackle your debt.

Know Where You Stand With Social Security

You've contributed to Social Security for decades, but do you know how much has accumulated in your Social Security account? It's easy to obtain an estimated amount based on your earnings history by creating a free my Social Security account.

Pro Tip: Our guide to estimating your Social Security payments provides helpful tools and tips for estimating how much you'll receive from Social Security in retirement.

Access Retirement Accounts Penalty-Free

Even the best-laid retirement plans can change, and you may need to draw upon savings earlier than anticipated. According to the IRS Age 59 ½ Rule, individuals withdrawing traditional IRA assets before the age of 59 ½, must pay a 10 percent penalty tax. However, there are several exceptions where you may not have to pay the additional 10 percent tax including:

  • The distributions are an annuity (traditional IRA).
  • You are totally and permanently disabled.
  • The distributions are for unreimbursed medical expenses.
  • The distributions are for qualified education expenses or an eligible educational institution.
  • You are the beneficiary of a deceased IRA owner.
  • You are purchasing a home for the first time

Don't Overlook Long-Term Care Insurance

According to the Pennsylvania Health Care Association (PHCA), an estimated 70 percent of people turning 65 will need long-term care at some point in their lifetime, and, on average, they will receive care for three years.3

As we grow older, we may face ongoing health challenges that involve long-term care. Continuing health care comes at a high price. For example, home health care averages $164 per day, and nursing home costs average $290 per day. Unfortunately, this type of treatment isn't likely to be covered by Medicare.

If you don't have a long-term care insurance policy in place, now is the time to select one. Your 50s is the ideal time to enroll, as premiums will be lower.

Take Care of Your Will and Estate Planning

This may be a difficult topic to think about, but it's a necessary one to ensure your end-of-life financial affairs are in order. Take time to draw up any outstanding documents and review existing ones including the following:

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Financial Milestones in Your 60s

Congratulations! You are now old enough to withdraw funds from your traditional IRA without incurring a penalty. Let's discuss the other important financial milestones you'll want to consider in this decade.

Think Through Health Care Coverage

After retirement, employer-sponsored benefits, including medical and dental coverage, will likely no longer be in effect. “We see an average age of about 61 for retirement, and most people aren't eligible to get Medicare coverage until 65,” says Keri Dogan. “That's really a bridge challenge for many people who don't have spousal benefits or retiree health benefits.” Dogan recommends thinking about bridge options, including COBRA, before pulling the trigger on retirement.

Apply for Social Security

When you can claim Social Security can be confusing. “A lot of people tend to claim too early, and they don't necessarily understand the trade-off they're making in terms of overall lifetime income,” says Dogan. “We focus on helping people understand what their options are and what the impact is going to be on their total lifetime income if they claim earlier than full retirement age.” Below are a few important considerations when applying for Social Security.

Receive Partial Benefits at Age 62

Age 62 is the earliest you're eligible to apply for Social Security. However, you will only receive a portion of your benefits. To receive 100 percent, you need to wait until you reach your full retirement age.

Did You Know: The Social Security Administration has an online benefits calculator to estimate how much you'll receive at age 62, compared to waiting until full retirement age.

Receive Full Benefits at Your Full Retirement Age

To receive 100 percent of your Social Security benefits, you must reach your full retirement age (FRA). Your FRA is based on your birth year. Here is a delineation of the FRA according to one's birth year:

  • The current FRA for individuals born between 1943 and 1954 is 66.
  • Those born between 1955 and 1959 reach their FRA after 66 years, plus a specific number of months.
  • For anyone born 1960 or after, full retirement age is 67.

Keep in mind, you aren't required to immediately claim your benefits just because you have reached your FRA. Delaying your Social Security benefits results in an increased monthly payout until you reach 70.

Did You Know: Fidelity Investments' “2021 State of Retirement Planning Study” found that only 17 percent of respondents correctly identified their FRA. Knowing your FRA is essential to ensure you make the most of your Social Security payments!

Check Supplemental Security Income Eligibility

In addition to Social Security, older adults may be eligible for Supplemental Security Income (SSI). SSI is a federal benefit available to those age 65 and older, individuals who have a disability, and those who are blind who have limited income and resources.

Enroll in Medicare at 65

Medicare is the largest health insurance program in the United States designed for older adults. Focused on medically necessary health care, Medicare covers needs such as acute care, hospital stays, and doctor visits. Eligibility begins at age 65. Your initial enrollment window starts three months before your 65th birthday and ends three months after your birthday.

Pro Tip: Even if you decide to delay your retirement and Social Security benefits, be sure to sign up for Medicare at age 65.

Decide on a Dental Plan

After retirement, employer-sponsored benefits, including dental coverage, will likely no longer be in effect. Most dental treatments, such as routine dental health care, full dentures, or partial plates are not covered under Medicare. Research and compare independent dental insurance plans, and select one that best fits your dental health needs.

Choose a Medicare Supplement Program or Medicare Advantage Plan

Older adults are eligible to enroll in a Medicare Supplement Program, known as Medigap, the month they turn 65. Medigap helps pay for certain costs, such as co-payments, deductibles, and coinsurance, not covered under basic Medicare. Medigap is offered by private insurance companies.

Another option to supplement Medicare is a Medicare Advantage Plan. Medicare Advantage Plans are offered through private insurance and typically cover hearing, vision, prescription, and dental costs (all with a copayment).

Pro Tip: For an in-depth comparison of these plans, visit our Medigap vs. Medicare Advantage guide.

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Financial Milestones in Your 70s

As we enter our 70s, it's time to start focusing on asset drawdown and preservation to make your money stretch for years to come. Below, we'll touch on other important considerations for this decade.

Cash in Delayed Social Security Benefits at 70

While you can claim 100 percent of your Social Security benefits at full retirement age, some older adults choose to delay their payments until age 70. Each year you wait to claim Social Security, your monthly benefits will increase by a specific percentage.4

For example, instead of receiving 100 percent of Social Security benefits at age 66, if you wait until age 70, you'll receive 132 percent of your monthly benefits.

It's important to keep in mind that when you reach age 70, there is no additional benefit if you wait to sign up for Social Security. After age 70, your monthly benefits stop increasing.

Take Your Required Minimum Distribution at 72

You've worked hard to build a solid nest egg of retirement funds. However, these funds cannot remain in your account forever. The IRS requires you to take an annual required minimum distribution (RMD) by age 72.

What retirement funds fall into this category? Tax-deferred accounts, including:

  • 401(k) plans
  • 403(b) plans
  • Profit-sharing plans
  • Traditional IRAs
  • 457(b) plans
  • Simple IRAs
  • SEP IRAs

It's imperative to calculate and take the right required minimum distribution. If you don't, you could face a considerable tax penalty: A 50 percent excise tax may be charged on the amount not distributed. Keri Dogan at Fidelity encourages people to “set up automatic withdrawals to cover their needs for RMDs so they don't face any penalties from an IRS perspective.”

Did You Know: The IRS provides required minimum distribution worksheets to help calculate your personal RMD.

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Since graduating from Harvard with an honors degree in Statistics, Jeff has been creating content in print, online, and on television. Much of his work has been dedicated to informing seniors on how to live better lives. As Editor-in-Chief of the personal… Learn More About Jeff Hoyt

Citations
  1. Internal Revenue Service. (2021). Retirement Topics – Catch-Up Contributions.

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  2. Experian. (2019). Americans in Their 60s Carry the Highest Average Personal Loan Debt.

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  3. Pennsylvania Health Care Association. (2021). The Need for Long-Term Care Continues to Grow.

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  4. Social Security Administration. (2021). If you were born between 1943 and 1954 your full retirement age is 66.

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