The U.S. is approaching “peak 65.” Are you ready for it?
The number of people who turn 65 every day will peak in 2024, and more people will be staring at the possibility of retirement, often without a plan or a roadmap to help them thrive. Given that more people are living longer, that’s a long time to spend bored, lonely or financially insecure.
Here’s a checklist to help you navigate the financial decisions, legal complications and social ramifications of retiring. Since 60% of workers retire earlier than planned, according to the Transamerica Institute and the Transamerica Center for Retirement Studies, you shouldn’t leave these tasks to the last minute. Get started now.
1. Update your will and estate-planning documents
Your will may be decades out of date and your financial accounts may have beneficiaries linked to a previous marriage. Dust off those documents and get them refreshed as soon as possible.
“Before you even start thinking about retirement, there’s some housekeeping that needs to get done,” says Eric Bond, the president of Bond Wealth Management.
On your immediate to-do list, make sure you have a will, power of attorney and healthcare power of attorney in case you become incapacitated and can’t act on your own behalf. You’ll also need a HIPAA waiver as well as a trust, says Catherine Collinson, the chief executive and president of the nonprofit Transamerica Institute and Transamerica Center for Retirement Studies.
“There’s still widespread belief that trusts are only for the affluent, but they’re for everyone,” Collinson says. “It’s amazing how small issues can take on enormous bureaucratic proportions. You want to try to avoid that.”
Nicholas Yeomans, a financial adviser and the president of Yeomans Consulting Group, says to check retirement plans, life insurance and annuity accounts to make sure you have your beneficiaries listed properly. You may have a will, but beware that beneficiaries on such accounts supersede a will, he says. Be sure to name secondary or contingent beneficiaries, as well.
2. Create a budget
“It’s really basic, but only 23% of preretirees and 19% of retirees have a written plan. Until you put the numbers into a spreadsheet, it’s impossible to come up with realistic expectations for how you’re going to live your life. Otherwise, you’re just winging it,” Collinson says.
“Life is much more complicated and challenging. You need backup plans and contingency plans,” she says. “It’s really important to plan for life’s unforeseen circumstances.”
Bond, meanwhile, cautions that people who retire in their 60s need to realize that longevity has increased and they could be retired for decades.
“Milk and eggs are not getting cheaper. You have to plan for the long haul,” he says.
Working Americans think they need an average of $1.1 million to retire, according to the Schroders 2023 U.S. Retirement Survey. Financial advisers generally recommend that people have 75% to 85% of their preretirement income for each year of their retirement.
Also read: How never to outlive your money
3. Build up your cash reserves
Once you have a budget in place, build up cash reserves to cover six to nine months of basic expenses, such as mortgage, utilities and living expenses, Yeomans says.
“People are either one of two extremes when it comes to emergency funds — too much cash or not enough,” he says.
And in the years leading up to retirement, Brandon Robinson, the president and founder of JBR Associates, recommends that you work on eliminating your “bad” debt, such as credit cards or vehicle payments. Having a mortgage, however, is not necessarily a bad thing, since a house is generally an appreciating asset, he says.
4. Consider hiring an adviser
“Most people only retire once,” Collinson says. “Financial advisers have the depth and breadth of experience to help. Many workers have a 401(k), and with that often comes access to financial guidance. Take advantage of that.”
She adds: “In today’s turbulent economy, the many people who may have felt comfortable taking a do-it-yourself approach may need help navigating uncharted territory.”
And make sure you meet with your financial adviser on an annual basis, Robinson adds.
5. Plan for healthcare and long-term-care needs
Healthcare is costly, and it can be even more so for retirees. It can cost as much as $5,100 a month for a home health aide, for instance, and an average of about $8,000 a month for a semiprivate room in a nursing home, according to the Genworth Cost of Care Survey. Genworth is a long-term-care insurance company.
By another measure, a 65-year-old retiring in 2023 could spend an average of $157,500 on health and medical expenses throughout his or her retirement, according to Fidelity Investments, which tracks retiree healthcare expenses annually.
Also think about the long-term costs of help with the activities of daily living, such as bathing, toileting and dressing — assistance that is not covered by Medicare.
When asked what their plans are for if and when their heath declined, 46% of retirees said they’d rely on family and friends, and 31% said they don’t have any plans or haven’t thought about it, Collinson says.
“People don’t want to think about needing someone to bathe and dress them. The cost and potential impact of these topics is enormous,” she says.
Collinson says it’s important to learn about long-term care — what’s available and at what price. That can help guide your decisions about long-term care insurance, but options in that market have contracted and costs have risen, putting such services out of reach for many people
Only 14% of retirees are very confident they could afford long-term care if needed, she says.
“Many people are under the impression that Medicare covers more long-term care than it actually does,” Collinson says. “And qualifying for Medicaid is extreme. It means that you’re at dire financial means, if not bankrupt. And Medicaid facilities have long waiting lists.”
6. Get the facts about Medicare
Speaking of Medicare, it’s important to learn what the program covers and what it doesn’t.
“There are so many decision criteria about the type, level and cost of care,” Collinson says. “It behooves everyone to understand the Medicare options best for them and review those plans regularly.”
Also, it’s critical to plan for Medicare when you’re 65, even if you’re not planning to retire until 67 or 70.
There’s a seven-month window to enroll in Medicare, which includes the three months before you turn 65, the month of your birthday and the three months after. If you miss that seven-month window and you don’t have health insurance from a large employer, you can face lifetime penalties for late enrollment in Medicare.
The first step is to contact the Social Security Administration — not Medicare itself — to start Medicare. And you’ll enroll only yourself — it’s not a family plan.
If you’re getting Social Security and you enroll in Medicare, your premiums will come directly out of your Social Security check. However, if you’re not getting Social Security yet, you should set up automatic payments for Medicare, because your enrollment can get canceled for nonpayment.
7. Plan your Social Security strategy
You need to know when and how to manage your Social Security claiming. The Social Security Administration website is a great starting point, but be sure to talk with a financial adviser or visit your 401(k) plan’s financial resource center to get more information.
Read: How much does my Social Security benefit increase when I delay filing?
“Ideally, you want to wait until the full retirement age or age 70, which is the maximum age,” Collinson says.
Full retirement age is 67 for those born in 1960 or later.
“When to take Social Security is a major decision that depends on your health, the health of your spouse, your jobs. Making that decision is a big one. Don’t take it lightly,” Robinson says.
Read: Inflation is already racing past next year’s Social Security COLA
8. Consider downsizing
“Consider downsizing or moving, but take your time,” Yeomans says. “People make major purchase mistakes in the first 12 to 18 months of retirement. But take your time. Consider renting before pulling that trigger.”
Aging in place is something about nine out of 10 people want to do, according to a survey from Transamerica Institute and the Transamerica Center for Retirement Studies, but Collinson says people need to prepare their homes for that.
You may need wider doorways that can accommodate a wheelchair, as well as chairlifts, grab bars and shower seats.
“If your dream home in retirement has lots of stairs, know that you may need to move when stairs become unmanageable,” she says.
9. Retire to something meaningful
Once you have the financial and legal aspects taken care of, think about how — and with whom — you want to spend your time in retirement.
“Make sure you’re not retiring from something, but instead retiring to something,” Yeomans says. “Men struggle with this the most. The average man has no close friends in their life who aren’t connected to work. And so much of our health in retirement comes from relationships.”
Now read: In retirement, time is short. Don’t waste it on things you hate.
People often don’t realize what they’ll lose when they quit working: routine, structure, social interactions, mental stimulation and in some cases physical activity, says Robert Laura, founder of the Retirement Coaches Association.
People also often don’t take their personality into account when considering retirement.
“If you’re a Type A personality, you may feel out of sorts with endless time. A lot of people don’t critically question retirement. They think it’s golden. But people often don’t want to retire — they just want to stop doing their primary job,” Laura says.
Joe Casey, managing partner of retirement-coaching company Retirement Wisdom, recommends talking to people who are thriving in retirement and learning how they spend their time and energy.
“People miss the challenge of working. What’s the new challenge that will help you keep growing? Don’t get too hung up on finding a singular new purpose. Try new things. Volunteer. Try several activities and be open to experimenting,” Casey says.
Casey suggests mapping out what a typical day or week will look like in retirement and how you plan to fill those hours. Give yourself some structure by having three things to do every day. That will provide you with a road map of how to spend your time but will also give you flexibility to let the day unfold.
Laura says the newly retired should set 30-, 60- and 90-day goals to create some structure and have small objectives to work toward.
“People suffer from choice paralysis — they have all the time in the world and so many options open to them. People go into retirement with vague ideas and don’t know where to start doing something, so they never do it,” Laura says.
“Retirement is the longest New Year’s resolution. It’s goals you have and never accomplish unless you’re focused. You don’t get extra motivation or energy in retirement, so you need to focus on what you want to accomplish,” Laura says.
A sobering statistic may spur you into action: The average retiree watches as much as 47 hours of television a week, according to AgeWave.
To avoid that, start thinking about and planning for retirement with your partner far ahead of the actual date. Learn each other’s goals and expectations for retirement and compare notes. Some adjustments might be in order.
“What if one wants to sail around the world and the other wants to see the grandkids every month?” Laura says.
Casey also recommends taking retirement for a test drive by taking a week off work. “You can get a good sense of retirement in a week trial,” he says. “It will show you how long a day can be.”
And Collinson says to prioritize physical fitness — but don’t forget about your mental health, too. Stay engaged with other people and avoid isolation.
Loneliness is as deadly as smoking up to 15 cigarettes a day and is associated with a greater risk of cardiovascular disease, dementia, stroke, depression, anxiety and premature death, according to a recent advisory from the U.S. Surgeon General.
The takeaway: Make sure you plan how you’ll carry out your hopes and dreams in retirement to make it all feel worthwhile.
“What was the reason you worked hard for so many years?” Casey says. “It wasn’t to watch 47 hours of TV each week.”
