If you'll be turning 65 in 2024, you're in good company. Data shows that 2024 marks the beginning of the Peak 65 Zone, where a growing number of people will be reaching that milestone birthday.
If your 65th birthday is approaching and you're still working, it means you're probably at least thinking about retirement if you haven't left your career behind already. And it's important to go into retirement well prepared. With that in mind, here are some essential moves to make in the near term.
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1. Assess your nest egg
Maybe you have a $1 million IRA or a 401(k) plan with a balance $800,000. It's easy to look at a large number like that and assume you're all set for retirement. But before you do, recognize that you'll need to tap your savings somewhat conservatively if you want that money to last throughout your senior years. And when you apply a modest withdrawal rate to even a large sum like the numbers above, it may not translate into all that much annual income.
A $1 million IRA, for example, will only result in $30,000 of yearly income if you withdraw from your savings at a rate of 3% per year. If you use the more widely accepted and slightly less conservative 4% rule, you're looking at $40,000 in annual income.
These aren't devastatingly low numbers if you're also expecting a decent-sized Social Security benefit each month. But do be aware of how much yearly income your nest egg is likely to provide you with. If you don't like the number, you could always try to work a few extra years to boost your savings.
2. Make sure you're invested in an age-appropriate manner
Once retirement is within reach, it's important to protect your portfolio from wild market swings. Often, that means selling off a portion of your stock portfolio and replacing it with bonds, which are generally far more stable.
Another nice thing about bonds is that they can serve as a predictable income source thanks to the interest they're obligated to pay. You might argue that dividend stocks do the same thing, but companies that pay dividends aren't required to do so, and they can halt that practice at any time. Bond issuers are contractually obligated to make interest payments.
3. Read up on Medicare
Many seniors are surprised -- in a bad way -- when they dig into Medicare and realize how many flaws the program has. Not only are there certain healthcare services that Medicare refuses to cover, but you'll also face a host of out-of-pocket expenses as a Medicare enrollee, from deductibles to coinsurance.
Medicare eligibility begins at age 65, so if you'll be reaching that age this year, you may be gearing up to enroll -- even if you're still working. But make sure you understand what Medicare costs and covers so your finances aren't thrown for a loop.
The more you plan for retirement, the more confident you can feel financially once it actually arrives. Make these moves if you're on the cusp of age 65. They could make your transition into retirement a lot more smooth.
