Between now and 2027, more than 4.1 million Americans will turn 65 each year. You may be looking forward to your 65th birthday if it brings you one step closer to retirement. But if you’re within a year of your 65th birthday, it’s important that you make these essential moves.
1. Figure out how much annual income your savings might provide
Maybe you have $1.5 million sitting in an IRA or 401(k) plan. Or maybe your balance is higher or lower.
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Either way, if you’re getting close to being ready to tap your nest egg, it’s important to figure out how much income to expect from it. And to do that, you’ll need to come up with a withdrawal rate. That rate should hinge on factors that include how your savings are invested and what you anticipate your life expectancy looking like.
The classic 4% rule may be a good one to utilize if your retirement portfolio is split pretty evenly between stocks and bonds, and if you want your savings to last for 30 years. But if you’re invested less so in stocks, that, for example, could be a reason to opt for a more conservative withdrawal rate — like 3%.
2. Decide when you’ll claim Social Security
You can sign up for Social Security at any age once you turn 62. So if you’re within a year of turning 65, it means you’re eligible for your monthly benefits already.
If you’re not taking benefits yet, now’s a good time to decide when to claim them. If you hold off until full retirement age, you’ll get your complete monthly benefit based on your individual wage history without a reduction. And if you’re able to delay your Social Security filing past full retirement age, you’ll enjoy a boosted monthly benefit for life.
You may want to land on a Social Security strategy after you’ve assessed your nest egg to see how much annual income it’s likely to provide. That way, you’ll be in a better position to know what monthly benefit you need to cover your bills.
3. Understand how Medicare works
Once you turn 65, you’re eligible for health coverage under Medicare. And you can actually enroll in Medicare a bit prior to your 65th birthday so that coverage is in place once that milestone arrives.
It’s important to read up on Medicare before you’re enrolled so there are no unpleasant surprises. You may, for example, not realize that there are costs associated with Medicare coverage, like Part B premiums, deductibles, and coinsurance. You may also want to pay for supplemental insurance (Medigap) to protect yourself from very large medical bills as a Medicare enrollee.
You should also know that there are certain services Medicare won’t cover. So the more information you gather, the better you can save and prepare accordingly.
Being within a year of 65 doesn’t necessarily mean that you’re within a year of retirement. But it’s a good idea to check these moves off your list at this stage of life so you can approach that big birthday with more financial confidence.
