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Secure Retirement in Your 60s

Sep 10, 2020 3 min read Ilana Polyak


By the time you reach your 60s, retirement is within sight. You may have a better idea of where you want to live when you stop working full time, and what kind of lifestyle you plan to enjoy.

On the other hand, your finances may not be in as good shape as you’ll need to live the retirement you envision for yourself.

Making a few tweaks now can help you get closer to your goal.


Downsize your home and life

With the average new home now sporting nearly 2,600 square feet of space, many empty nesters find themselves not needing—or being able to afford—such a big spread.

Downsizing means you can pull out some home equity—money you can then use to boost your nest egg. Going smaller can also help lower monthly expenses and improve cash flow. After all, smaller spaces tend to have less upkeep, repairs, and cooling and heating costs.

Bear in mind, though, that not all downsizing results in savings. Moving from a sprawling suburban ranch into a tiny urban condo could end up costing more.

Pay attention to the other costs of relocating. Some states don’t have an income tax and may have low tax rates on Social Security and pension income—but their property taxes might be high. Other states may have low income taxes, only to impose big sales taxes.

For example, Texas doesn’t levy income tax, but, reports the Tax Foundation Opens in new window, its state and local sales taxes are among the nation’s highest. Be sure to do all your research before you relocate.


Figure out your income needs

During your working years, you may have been lucky enough to earn a steady salary. But in retirement, income becomes perhaps your biggest challenge. The first thing to do is figure out how much money you need each month, and where it will come from.

Experts typically advise an retirement income equal to 70% to 80% of your final pre-retirement income. Some costs, such as commuting or a work wardrobe, could disappear, so you might spend less money in retirement. (In the age of COVID-19, you might already have an idea of how much you’ll save minus a work commute or dry-cleaning bills.)

Start by considering any guaranteed income sources, such as Social Security and pensions. Next, turn to retirement assets. The ideal withdrawal rate—how much you can safely take out each year—has been hotly debated for decades. And while a financial advisor can give you personalized guidance on the right rate for you, 2% to 3% a year is a rough estimate. In other words, if you have $500,000 in retirement savings, you can probably withdraw $10,000 to $15,000 a year.

Even so, if there’s a gap between your income and your expenses, you might need to make some compromises. Can you reduce your outlays by downsizing your home, moving to a less expensive part of the country (or even to another country), selling a car and eating out less often? Or perhaps you can work a few more years than you’d originally planned—giving you more time to save and fewer years in retirement to save for.


Work longer and reap the financial rewards

Increasingly, working longer is becoming commonplace. The Bureau of Labor Statistics notes labor participation among people age 65 and older Opens in new window has been growing far faster than any other age group, and should continue to do so until at least 2029.

Longer life spans, fewer retirement guarantees and, of course, the economic (if not stock market) crash in the wake of the COVID-19 pandemic have led many to worry that they won’t be able to finance a long retirement.

Working longer (if you can) has many important benefits. First, it gives more time for a nest egg to grow. For example, working two years longer—without saving another dime—can still add 12.4% to an account, assuming a 6% annual growth rate. (This, of course, is never guaranteed, and the older you are, the less stock risk you may want to take with your portfolio.) Working four years more (again, without saving more) could potentially increase the value of a nest egg by 24.2%.

In addition, working longer also reduces the number of years your savings must fund. A $500,000 portfolio has a much better chance of lasting for 20 years than 25. And it can help you delay the start date of your Social Security benefit, resulting in higher monthly payments for the rest of your life.


Don’t forget health care

Though health care factors prominently in retirees’ budgets, many people fail to plan for this big-ticket item. According to Investopedia, a 65-year old couple who retired in 2019 can expect to pay almost $285,000 for medical care not covered by Medicare.1

What’s more, health care costs increase by twice the historical rate of inflation. The Centers for Medicare and Medicaid Services estimate Opens in new window that health spending will grow 5.4% a year through 2028.

To tame those costs, make sure you have a robust Medigap policy to cover things Medicare doesn’t, such as copayments and coinsurance. Also, mind your health by eating well and keeping your weight in the normal range. People who have chronic conditions such as diabetes and heart disease spend more than those who don’t.


What you can do next

Entering your 60s gives you much-needed clarity on the retirement front. Use these years to lay the foundation for the retirement you want: Focusing on where (and how) to live, your income plan and things you may need to do, like downsizing or working longer, to live within it.


1 Rebecca Lake, "How to Plan for Medical Expenses in Retirement," Investopedia, updated Nov. 25, 2019


Ilana Polyak is a freelance writer who specializes in personal finance and the financial advisory industry. Her work has appeared in The New York Times, Barron's, Kiplinger's Personal Finance, Bloomberg BusinessWeek and CNBC.com, where she is a frequent contributor.


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