In this segment from Motley Fool Answers, Alison Southwick and Robert Brokamp break down a proper investing and retirement strategy by decade. We have finally reached the twilight years -- our 70s, now retired and enjoying time with the grandkids. But when you crossed one financial finish line, you started a different race. Going forward, your priorities are to manage your healthcare costs while ensuring that your savings withdrawal rate will leave you solvent for the rest of your life.

A full transcript follows the video.

This podcast was recorded on April 18, 2017.

Alison Southwick: Your 70s and beyond are an exciting time. Your years of saving and planning are paying off. You get to volunteer your time, travel, and spoil grandchildren. Sure, your body aches a bit and you've got some sunspots and some laugh lines around your mouth, but they are all signs of a life well lived. So what should be your priorities in retirement?

Robert Brokamp: Number one, you want to ensure your portfolio will last as long as you do, and that is understanding safe withdrawal rates in retirement, which is one of my favorite topics.

Southwick: Yeah. I know.

Brokamp: You know. And most people think of 4%. That's a classic rule of thumb, and it's a fine rule of thumb, but most people should be taking out either a little bit more or a little bit less depending on your circumstances starting, for example, with your age.

The studies that determine that 4% safe withdrawal rate assume you'll retire at age 65. But what if you're 55? What if you're 75? You really need to learn about how all that goes. I would recommend the three people to read to learn about this type of stuff is David Blanchett at Morningstar, Michael Kitces, and Wade Pfau. If you want to learn a lot about safe withdrawal rates in retirement, go check out those guys.

Number two, you want to learn how to sell investments in a tax-efficient manner. You're now in this situation where you are selling assets to generate income. One rule of thumb is if you have a taxable account, a traditional tax-deferred account, and a Roth; you drain your taxable account first, then the traditional account, and then the Roth. It depends on your circumstances because it might be better to touch the Roth a little bit sooner to avoid huge withdrawals from traditional accounts when you have to take money out at age 70 1/2. So there's some stuff to learn about that, but there are lots of ways to reduce the tax bill on how you turn your portfolio into an income-generating machine.

And then the third one is managing healthcare costs. For retirees, most of their expenses actually go down as they get older. The one exception is healthcare. So for someone who's 65, on average they spend about 10% of their budget on healthcare. Eighty-five year olds spend about 20%. Of course, you first want to make sure you're taking care of yourself so you don't have to spend so much on healthcare. But then understanding the healthcare system, Medicare, and all that so you can manage those costs as well as possible.

Southwick: And how much should you have saved once you're in retirement? All of it? One hundred percent?

Brokamp: As a good rule of thumb, you should have 12 times your annual income before you retire. And then beyond that it depends on your age, but 12 is a good rule of thumb. If you have a lower income, or a lot of your income will be provided by Social Security and a pension, you can have less. If you had a higher income throughout your life, Social Security is not going to replace as much of that, so you might need something like 14 times your income before you retire.

Southwick: All right, and this is a tough question, but what do you think is one of the biggest mistakes to avoid in your retirement?

Brokamp: I would say not preparing for changes in your ability and availability to handle your finances. And what I mean by that is as we get older we may not be as sharp as we used to be. A month ago we had a [professor from Georgetown] by the name of Dr. Sumit Agarwal [talking about behavioral finance]. In one of his studies he concluded that our peak age for making financial decisions is 53.

It turns out that our raw intellectual power (our IQ) peaks pretty early in life, like in our 20s, but it's compensated by wisdom and experiential learning. Once we hit age 53, that might be the peak, and for some people it goes down considerably to a point where as many as half of people in their 80s and 90s have some sort of cognitive difficulty handling their finances. Not everyone. Warren Buffett's in his 80s and he's doing just fine.

But you have to prepare for that possibility. That means getting your estate plan set up and thinking about who's going to handle your finances if either you're mentally not able to do it or if you're the person in this married couple that handles the finances and you die before your spouse. It could be one of your kids that you trust, or it could be you start a relationship with a good financial planner who can handle that for you later in life.

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