Turning 65 This Year? 6 Things You Need To Do Now for Retirement

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Sixty-five is a magic age for many retirees. You’re finally eligible for Medicare and can get higher Social Security benefits than at age 62. If your financial situation aligns, you may finally be able to set down your working days and retire.

However, there may be reasons to put off retiring until later. Either way, 65 is an important year to have a very solid idea of your plan, even if you can’t retire yet.

Financial advisors explain what you want to be sure to do for retirement if you’re turning 65 this year.

Get Medicare and Healthcare Squared Away

According to Michael Cocco, CFP at Beacon Wealth Management, people turning 65 this year should ask themselves some key questions. Does your job offer any retiree health benefits? How much do they cost and how do they compare to Medicare and getting a Medicare supplement?

Then, he recommended you work with an experienced and licensed health insurance expert who will help you evaluate your current coverage, and specifically determine what coverage you will need in retirement for certain doctors, specialists, prescriptions and so on.

“Do not just choose the cheapest plan, as often you get what you pay for and some Medicare supplement plans are very inexpensive but only offer limited benefits,” he said. “Know your budget for healthcare and find a plan that suits your needs.”

Understand Medicare Differences

While many people know they can get signed up for Medicare three months before their 65th birthday, Medicare is not as straightforward as it seems, according to Louise Norris, health policy analyst for healthinsurance.org. So you’ll want to educate yourself on the differences in plans before you need it.

“When you’re enrolling in Medicare for the first time, you’ll need to choose between Original Medicare and Medicare Advantage,” Norris said. “This is an important decision because Medigap, which is used to supplement Original Medicare, only has a one-time guaranteed-issue enrollment window in most states.” 

While there is an annual open enrollment period when a person can make changes to their Medicare Advantage or Medicare Part D prescription drug coverage, that window doesn’t apply to Medigap plans, she said. 

“This can make it challenging for a person to switch to Original Medicare several years later if they have pre-existing health conditions,” Norris said.

Delay Taking Medicare Until Age 67

If you are taking Medicare at age 65, most people do not have to pay a premium for Medicare Part A, which is inpatient coverage, but there is a monthly premium for Medicare Part B, which is outpatient and medical coverage, Norris said.

“You can choose to delay Social Security until you’re 67 to maximize your monthly benefit. However, delaying enrollment in Medicare is generally not recommended unless you’re continuing to work and have group coverage. Otherwise, you could find that you’re stuck paying late enrollment penalties for the rest of your life if you don’t enroll in Medicare Part B when you’re first eligible.”

Create a Social Security Account

If you haven’t yet, sign up for a MySocialSecurity account via SSA.gov where you can review your earnings history to make sure it is correct, as that is what your Social Security benefits are based on, Cocco said.

“Download your latest Social Security benefits statement and know what benefits you will get at certain ages. Work with a financial advisor to see when and how you should take Social Security, and if you are married, there are more variations of how and when each spouse should collect to optimize Social Security for the family.”

If your health is good and you don’t need the money right away, at least try to have the person with the higher Social Security wait until age 70, or as close as possible to age 70, he explained. 

“[At] some point, there will be only one spouse living,” he said, “and the one who is living will get to use the higher of the two benefits, so we would want to try to maximize that benefit, if possible.”

Take Stock of Your Cash Flow

Cocco said it’s more practical to think about cash flow over budgeting as you get closer to retirement.

“Know what will be coming in the door each month as income in retirement from pensions, social security payments, annuities, etc,” he said. “Know how much you need to spend on the normal monthly expenditures, and then how much you want to spend on luxury items such as vacations, etc.”

Then, look for “the gap” between what is coming and what you will need to spend each year, and then work with an advisor to solve for that gap, through your investments.Do an Investment Review

Now that you may be exiting the accumulation phase of your investment life and entering the distribution phase, and once you know your “gap” in retirement income, you can reallocate your investments to meet your needs, Cocco said.

“For example, most folks have their investments leaning toward the aggressive side of moderate when they are saving money all their life, but now, controlling risk and creating income becomes even more important than growth.”

He explained that if you have an annual gap of $24,000 per year ($2,000 per month) and you and your advisor feel you can generate net cash flow after fees and taxes of 4% of your assets, you would need approximately $600,000 to dedicate to this strategy to generate $2,000/month, without necessarily touching the principal.

Review Your Beneficiaries and Estate Plans

As you enter this final stage of your life, it’s important to think about who will help you make final decisions on your life and health, and what you will leave behind.

Cocco asked, “When was the last time you reviewed your beneficiaries? You may know your primary beneficiaries, but what about contingent beneficiaries? Do you have a testamentary trust provision in your will that you should be naming as your contingent beneficiary on your retirement accounts and life insurance?”

You also want to make sure any wills are up to date, such as a living will and/or medical directive so your loved ones know what your medical wishes are. 

“How about a power of attorney? This is extremely important as if someone needs to help you access your financial assets but you are incapacitated or not able to sign, they cannot do so without a power of attorney,” Cocco said.

While everyone’s retirement plan looks different, taking these steps can ensure there are few surprises in retirement.

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