Assess your situation. When, exactly, you decide to stop working can be a major game changer. In general, Americans are working longer these days, because we're healthier, but also because it allows us more time to save, and postpones tapping into what we've already saved, allowing that money more time to grow -- and to bounce back from the lows of the last few years. In a 2010 survey, 57% of workers said they expect to retire at age 65 or later, and 24% are ready to stretch their employment past age 70. If the decision to leave your job falls on your shoulders -- and in this economy, it might not -- you need to think long and hard about whether you can afford to retire yet. There are a few good calculators that can help you, but I like this one from T. Rowe Price.
If you're forced to retire early or you can't pass up a buy-out, but still need -- or want -- to continue working for a few more years, do a little soul-searching to figure out what you'd like to do, even part time. Many older workers use retirement as an opportunity to start a small business or pursue a passion. AARP also has a good job search tool.
"Usually in the first five years, whether or not you're still working part time, you spend the most money on discretionary expenses," says Alpers. "After that most people have sort of been there done that, and they tend to pull back." That means you really need to focus on reining in your front-end expenses, so you don't go out of the gate too fast. Put yourself on a budget by the month or even week, based on your total income, including any earnings, your Social Security income, and how much you can withdrawal from your retirement accounts. Which brings me to ...
Set a withdrawal rate. Retirement planning experts have set 4% as a rule of thumb, which means that in general, you can withdrawal that amount from your retirement accounts each year and your money should last as long as you do. But that 4% is a moving target, and you have to stay on top of things. If your investments are floundering, your 4% will be less than it may have been last year. If they're doing well, 4% could be a lot more than you need. These fluctuations mean you have to stay flexible. You should also give yourself a checkup every year or so to make sure your portfolio is still going to carry you through. To do that, sit down with a financial planner, or run your numbers through that T. Rowe Price calculator again.
Consider long-term care insurance. Age 60 is about the right time to buy, says Alpers, because you're still young enough that if your health is good, a policy will be affordable. If you have assets worth upwards of $2.5 or $3 million, you probably don't need long-term care coverage, because you'll be able to pay for it on your own. But if you fall below that threshold -- and many of us do -- and you can afford the premiums (they're pretty hefty, sometimes north of $1,800 a year, but the older you get, the more you'll pay), you should talk to an agent about your options now.
Start estate planning. If you plan to pass an inheritance on to your heirs, you want to work with an estate planning attorney, who can help you do it correctly. There are a lot of tax issues around inheritance that can be too complicated to navigate on your own (although if you just need a basic will, a health care proxy, and a durable power of attorney, you may be able to find document templates on the websites of your state bar association -- but I'd still have a lawyer look them over, just to be on the safe side). Just remember that your needs come first in this, says Alpers.
"Many people would like to pass on a legacy, which is understandable," she says, "but it's important to also look at taking care of yourself, and making sure that your quality of life is the best it can possibly be today."
Also in this series:
20s: Getting Started
30s: Boosting Your Health
40s: Envisioning the Future
50s: Getting Serious