Retirement Guide: Important Things To Do When Turning 65

Reaching the age of 65 marks a significant milestone in your life. For many people, it also signals the transition into retirement – a period filled with newfound freedom, leisure, and a chance to explore your hobbies and passions long set aside. However, amidst the excitement of this next chapter, it is crucial to acknowledge the importance of careful planning and consideration for the road ahead. As you approach this pivotal age, it is important that you take stock of your financial situation. There are essential tasks and decisions that demand your attention at this point, and crafting a strategic plan can provide you with clarity and confidence as you begin this journey.

A financial advisor can help you explore the key aspects that warrant careful attention during this age and create a personalized retirement strategy as per your specific needs and goals. This article will also discuss crucial steps and considerations for individuals turning 65 to help you navigate the complexities of retirement with ease.

Below are four tips that you should consider when turning 65 to live comfortably during your retirement years:

Tip 1: Apply for Medicare

Upon reaching the age of 65, there are several crucial steps to take to ensure a smooth transition into retirement. Apply for Medicare, the federal government’s health insurance program for individuals aged 65 and older or those with qualifying disabilities. Medicare is comprised of several parts, each covering different aspects of healthcare. Understanding these components is key to making informed decisions about your coverage. The main parts include the following:

Medicare Part A: This aspect of Medicare covers inpatient hospital care, hospice care, skilled nursing facility care, and some home health care services. For many, Part A is automatically paired with Part B.
Medicare Part B: Part B helps cover medical services like doctor’s visits, outpatient care, preventive services, and some medical equipment. It is important to note that while Part B provides comprehensive coverage, it does not include benefits for dental or vision care.
Medicare Part C, also known as Medicare Advantage: This option provides coverage beyond what is offered by Parts A and B. Medicare Advantage plans are offered by private insurance companies and can offer benefits like vision, dental, and prescription drug coverage. Enrollment in these plans is not automatic and requires active participation.
Medicare Part D: This part of Medicare provides coverage for prescription drugs. It is offered through private insurers and helps offset the costs of necessary medications. Even individuals currently in good health should consider enrolling in Part D to prepare for potential future medical needs.

With a seven-month enrollment window surrounding your 65th birthday, it is essential to understand the process and options available to you beforehand. Applying for Medicare is a relatively straightforward process for most individuals. If you are already receiving retirement benefits from Social Security or the Railroad Retirement Board, you will typically be automatically enrolled in Parts A and B. However, if you are not receiving retirement benefits and do not have health coverage through an employer or spouse’s employer, you will need to apply for Medicare during your enrollment window actively.

You can apply for Medicare through various channels, including online, by phone, or in person at a Social Security office. Ensure that you sign up during your enrollment window to avoid potential late enrollment penalties. Additionally, if you have a Health Savings Account (HSA) or health insurance based on your current employment, it is advisable to consult with your Human Resources (HR) office or insurance company to understand how signing up for Medicare may impact your coverage.

Tip 2: Buy a long-term care insurance plan

As you approach the age of 65, it is essential to consider your long-term care needs and how you will address potential expenses associated with assisted living, nursing care, or in-home assistance. Long-term care insurance helps mitigate these costs and ensure you receive the care you need as you age. Statistics from the U.S. Department of Health and Human Services underline the importance of planning for long-term care. According to their findings, in 2023, nearly 70% of individuals turning 65 will require some form of long-term care in their lifetime. With the median cost of assisted living reaching approximately $4,917 per month, or $59,007 annually, it is evident that long-term care expenses can have a significant financial impact on retirees.

Medicare often does not provide comprehensive coverage for long-term care, which is why private insurance may be your only option. Long-term care insurance provides coverage for various expenses and services aimed at helping individuals maintain their daily lives as they age. Whether it is assistance with Activities of Daily Living (ADLs), such as bathing, walking, dressing, or meal preparation, or more intensive care in a nursing home or assisted living facility, this type of insurance can help cover these costs. When exploring long-term care insurance options, it is advisable to consult with a financial advisor to assess whether it is the right choice for your individual circumstances. Long-term care insurance coverage can be complex and expensive, so having personalized retirement planning advice from an advisor can help you navigate the process and find a plan that aligns with your needs and budget. Financial advisors can provide valuable insights into the various long-term care insurance policies available and help you understand the benefits, limitations, and costs associated with each option. They can also assist in evaluating other potential sources of coverage, such as State Partnership Programs or voluntary benefits offered by employers.

Even with Medicare and health insurance, it is essential to consider long-term care insurance. This is a crucial step in preparing for retirement and safeguarding your financial security as you age. It can provide you with peace of mind and ensure you have access to the care you need in the future. It also ensures you do not have to depend on others for your basic needs in your old age.

Tip 3: Review your retirement accounts

As you approach the milestone of 65 and contemplate your retirement journey, it is crucial to review and optimize your retirement accounts to ensure they align with your financial goals and aspirations. Here are three tips to help you retire better when it comes to your retirement accounts:

1. Roth conversions

Do explore the advantages of Roth conversions, particularly if you find yourself in a lower tax bracket before mandatory distributions from traditional retirement accounts and Social Security benefits commence. Roth Individual Retirement Accounts (IRAs) offer the attractive benefit of tax-free withdrawals, which makes them an appealing option for retirees. This strategy can also be advantageous if you are looking to pass on an inheritance to your heirs, as Roth IRAs allow for tax-deferred growth and tax-free withdrawals for beneficiaries. You can consider converting your traditional accounts into Roth. However, be wary of the tax implications as the transferred funds are taxed in the year you make the conversion. Converting smaller portions of your traditional IRA to a Roth IRA can help you strategically manage your tax liabilities and potentially maximize your retirement savings.

2. Mega backdoor Roth

The mega backdoor Roth strategy is a specialized 401(k) rollover tactic utilized by individuals with high incomes to funnel funds into a Roth IRA or Roth 401(k). This method is applicable only in specific scenarios and is typically employed by those with surplus funds seeking to maximize contributions to a Roth IRA. In 2024, you can contribute up to $46,000 of after-tax dollars to your 401(k) plan, in addition to the regular contribution limits. This excess contribution can then be rolled over into either a Roth IRA or Roth 401(k) to enjoy tax-free growth and withdrawals in retirement. However, it is essential to understand the rules and limitations of this strategy, particularly regarding employer contributions and plan eligibility, before you proceed.

3. Portfolio review

Take the time to review your retirement portfolio to ensure it is appropriately allocated based on your target retirement date and risk tolerance. Evaluate whether your current investments are aligned with your long-term financial objectives and make any necessary adjustments to optimize your portfolio for retirement. Consider diversifying your portfolio to lower risk and maximize potential returns by considering factors such as asset allocation, investment performance, and market conditions.

It is also important to consider seeking guidance from a certified retirement financial advisor to navigate complex retirement planning strategies, such as catch-up contributions, Required Minimum Distributions (RMDs), and early withdrawals. A financial advisor can help you establish a personalized retirement plan crafted to your unique circumstances and goals, including implementing strategies like the mega backdoor Roth IRA. They can also provide valuable advice on managing employer-sponsored plans, such as the Roth 401(k), and help you make informed decisions to secure your financial future.

Tip 4: Update your estate plan

Turning 65 marks a significant milestone in your life, and it is a perfect time to revisit and update your estate plan to ensure that your wishes are clearly outlined, and your loved ones are protected. Here are some steps to consider when updating your estate plan:

1. Create or update your will

If you do not already have a will in place, now is the time to create one. A will is a legal document that specifies the distribution of your assets, such as cash, retirement accounts, stocks, real estate, and more, among your heirs. It allows you to nominate your loved ones as your beneficiaries for your property and assets, as well as appoint an executor to oversee the distribution of your estate. If you already have a will, you must review it regularly to ensure it aligns with your needs and wishes and circumstances. Life events such as marriage, divorce, death or birth of children or grandchildren, etc., may necessitate updates to your will.

2. Establish medical directives and powers of attorney

In addition to a will, it is essential to have medical directives and financial powers of attorney in place. A medical directive specifies your preferences for healthcare and end-of-life care if you are unable to make decisions yourself. It is also known as a living will or advance healthcare directive. A financial power of attorney designates someone to make financial decisions on your behalf if you become incapacitated. These documents ensure that your wishes regarding healthcare and finances are respected and carried out according to your instructions.

3. Organize financial documents

Take inventory of all your financial documents, including bank accounts, investment accounts, insurance policies, and estate planning documents. Keep a comprehensive list of these accounts and their associated contact information in a secure location, such as a safe or a digital password-protected file. Make a note of any safety deposit boxes you may have and ensure that your loved ones know how to access them if necessary. Organizing your financial documents will make it easier for your loved ones to manage your estate in the event of your incapacity or death.

4. Name guardians for minor children

If you have minor or disabled children, you must designate a guardian to take care of them in your absence. Nominating guardians in your will ensures that your children will be cared for by people whom you trust and who share your values and parenting philosophies. Discuss your wishes with potential guardians and ensure that they are willing and able to take on this responsibility.

5. Consider tax planning strategies

Estate planning also involves minimizing tax liabilities for your heirs and beneficiaries. You can hire an estate planning attorney or a certified retirement financial advisor to learn suitable tax planning strategies to manage your estate. This may include using lifetime gifting exemptions, establishing trusts, or taking advantage of tax-saving opportunities available under current tax laws.

To conclude

Turning 65 is a time of both celebration and contemplation as you begin the next chapter of your life. While the prospect of retirement may evoke mixed emotions, it is essential to approach this transition with careful consideration and preparation. Take the time to review your retirement plan to ensure it aligns with your goals and aspirations for the future. Consult with a financial advisor for retirement planning advice and take proactive measures to fortify your finances. This way, you can set the stage for a fulfilling and secure retirement ahead.

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