Important Financial Milestones Every Senior Should Know

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.

Financial Milestones in Your 50s

Who hasn't dreamt of retiring to a tropical island to live a life of luxury? What we once 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 and workplace investment innovation 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?

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

Important Financial Milestones Checklist

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 for certain plans.1 Each year, you have the ability to contribute the following amounts based on your retirement plan:

• Contribute an extra $1,000 to your traditional or Roth IRA
• Contribute an extra $3,500 to your SIMPLE 401(k)
• Contribute an extra $7,500 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 future fixed incomes. 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.

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, the median cost of home health care is $222 per day, and the median for nursing home costs is $297 per day. Unfortunately, this type of care isn't likely to be covered by Medicare.

If you don't have a long-term care insurance policy in place, consider selecting one soon. Your 50s are 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:

• Will
• Trust
• Power of attorney
• Advance healthcare directive
• Life insurance

Financial Milestones in Your 60s

Congratulations! You are now old enough to withdraw funds from your traditional IRA without incurring a penalty.

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. Keep in mind that you can apply for Social Security benefits up to four months before you want your retirement benefits to start.5

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 age 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.

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 and 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.

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).

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.”