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How to Plan for Retirement in Your 70s and Beyond

By Chuck Saletta - May 1, 2016 at 7:36AM

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Your plan for retirement in your 70s or beyond should take advantage of the fact that most rules surrounding retirement expect you to be retired by that age.

When it comes to retirement planning, your 70s are generally treated as though you're either retired or incredibly close to getting there. Once you hit 70, you no longer get delayed-retirement credits for waiting to claim Social Security. Not only that, but you're no longer eligible to contribute to traditional IRAs once you've reached age 70-1/2, though you can still contribute to your Roth IRA if you meet the income eligibility rules.

In addition, once you reach age 70-1/2, you are required to start taking distributions from your traditional IRAs and any 401(k) plans you have unless you are still employed by the company sponsoring the 401(k) and own less than 5% of that company.

However, even though these policies suggest that 70 is the age at which you should be living off your savings and Social Security income, not all Americans aged 70 and up have a fully funded nest egg. If you find yourself in your 70s and unable to call it quits financially, don't despair. You can still retire, but it may not be quite as early or as rich as you had originally hoped.

Here are some key things you can do to improve your retirement.

Bank your Social Security
Once you've reached age 70, you no longer get increasing benefits for waiting to collect Social Security. So if you're 70 or older and still working, start collecting your Social Security now, but don't spend it. Instead, save it, invest it, or use it to aggressively pay down any debts you still have.

Work a little longer
Every year you work is another year you can add more to your nest egg, another year for your money to grow on your behalf, and another year less that your retirement nest egg has to support you. The often touted 4% rule for retirement withdrawals assumes a retirement lasting 30 years. The same study that came up with the 4% rule indicates that you can spend down your nest egg at a far greater rate if you're expecting a substantially shorter retirement -- as much as 8% if you're expecting your retirement to last only 15 years.

Focus on cutting your costs
Many people discover that as they age, they're more willing to spend less on their lifestyle. Indeed, with the likely exceptions of healthcare or assisted-living costs, most people's core living expenses drop in their 70s. Thanks to grown children, paid-off mortgages, and the potential for "homestead" exemptions for seniors to lower their property taxes, many of the major expense-drivers affecting younger folks no longer apply. The costs you cut today turn into savings you can spend in the future if needed.

Continue to own stocks
In your 70s, it still makes sense to keep a portion of your portfolio invested in stocks, even if you're retired or planning to retire in the near future. After all, you need your portfolio to last the rest of your life, and over the long haul, stocks typically have the potential for higher rates of return than bonds do. By keeping some money in stocks, you give your nest egg a fighting chance to last as long as you do. Just be sure that you're not relying on your stocks for money you expect to spend in the next few years.

Keep investing new money
Remember that although you may have to start withdrawing money from your retirement accounts, you don't have to spend that money. In addition, there's nothing preventing you from saving and investing new money outside of your retirement plans. While compound growth won't help you as much as it could have when you were younger, the money you sock away will still have a fighting chance of beating inflation and building your nest egg.

Make your 70s the start of the next chapter of your life
Even though we're led to believe that we should all retire by age 70, you may not be quite ready to call it quits. Whether you're close to the finish line or still have a long way to go, you need to prepare yourself for the retirement that awaits you. The sooner you start, the sooner you'll cross that finish line and enjoy the perks of financial independence.

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