Moneyzine
/Retirement Guides/Retirement Planning in Your 60s

Retirement Planning in Your 60s

Moneyzine Editor
Author: 
Moneyzine Editor
5 mins
November 20th, 2023
Advertiser Disclosure
Retirement Planning in Your 60s

If you agree with the mindset "it's never too late," then you'll appreciate what retirement planning in your 60s is all about. When it comes to something as important as retirement planning, don't ever give up and concede it's too late.

Overtime Retirement Planning

Most of our careers last roughly 40 years. If we break down our careers into quarters, then we're pretty much running into overtime by the time we're in our 60s. That's a good analogy 60-somethings need to think about when they approach retirement planning, with a sense of urgency.

Fortunately, by the time you've reached age 60 there are two things working in your favor. The first is that most of the larger household expenses should be out of the way or paid off. Secondly, you're at or near the peak earning years.

The combination of near-peak earnings and lower expenses means you should have a lot of disposable income. You might just need that money if you've been busy with other distractions and ignoring the years ahead.

Getting Ready for Retirement

It doesn't matter if you've been saving for retirement for an entire working career or you're just getting started. Age 60 is a great time to assess, or reassess, retirement income needs and see if they are aligned with the sources of income you'll have available in retirement.

Planning Calculations

The easiest way to start getting financially ready for retirement is to begin crunching through some numbers. If you dread crunching numbers, we've made the process easier. We have ten different retirement calculators that can provide a wide range of help including:

If you think it's too late to start saving for retirement, then let's take a look at the impact savings can have on your future income, even if you only have five years left until you stop working.

Retirement Saving Example

In this particular example, we're going to compare two scenarios. Basically, we're going to attempt to demonstrate the impact that saving for retirement, even in your 60s, can have on income after retiring.

Impact of Retirement Savings

Current Age

60

60

Desired Retirement Age

65

65

Annual Household Income

$100,000

$100,000

Anticipated Income Growth Rate

3.0%

3.0%

Desired Income Replacement Rate

63%

75%

Current Retirement Assets

$0

$0

Expected Return on Investments

NA

8.0%

Expected Pension at Retirement

$40,000

$40,000

Social Security at Retirement

$30,000

$30,000

Ongoing Annual Savings Required

$0

$21,589

At age 65, each of these workers would be making nearly $116,000 per year, and they could expect to replace $73,000 of that income with Social Security and their pension plan. If no money were placed into retirement savings accounts for the next five years, these two sources of income would replace only 63% of their before-retirement income. This is well below the 70 to 80% income replacement guide.

However, by saving a little over $21,000 a year for the next five years, this person will have accumulated nearly $137,000 in their account, and is able to now replace 75% of their pre-retirement income. In fact, that retirement money could be expected to supply nearly $14,000 per year in additional income.

If you don't like the scenarios we've put together in our example, then create your own. The calculations in the above example were all performed using our retirement savings calculator.

Saving for Retirement

We hope the above example demonstrates that saving for retirement in your 60s can make a considerable difference in your post-retirement lifestyle. Can saving for retirement be "painful?" Yes it can, and for those just tweaking their plan, you might be pleasantly surprised to find you're actually running well ahead of schedule. For those that have not planned quite so thoroughly, now is not the time to dwell on the past but to start taking action.

Funding a Retirement Account

Once you've figured out how much you'd like to save between now and retirement, it's time to decide what type of retirement account you're going to fund. For example, should you put the money in a 401(k) plan, or is a Roth IRA better in your situation?

To help with that decision, we have a retirement investing guide that walks users through a series of questions aimed at helping them to decide which type of retirement fund they can, and should, start funding.

Playing Catch Up

Finally, if you're in the situation where it's necessary to play a lot of catch up with your retirement savings, keep in mind the IRS has some catch-up limits that apply to individuals that are age 50 and older:

  • 401(k) Plans: In 2020 and 2021 you can contribute up to $26,000 to a 401(k) plan, which includes a $6,500 catch up limit. For more information on future limits, take a look at our article on 401(k) contribution limits.

  • IRA (including Traditional IRAs and Roth IRAs): In 2020 and 2021, you can contribute up to $7,000, which includes a catch up limit of $1,000, to a Traditional or Roth IRA.

Finally, be sure to stay informed of the retirement planning options your company offers. Back in 2007 and 2008, many companies began introducing Roth 403(b) and Roth 401(k) plans, which provide employees with the combined benefits of each of these programs.

Additional Rescources

  • The sheer number of offerings can be intimidating to anyone thinking about investing in a retirement plan for the first time. It's easy to get confused, especially when it comes to tax-advantaged plans versus employer plans.
    Moneyzine Editor
    Moneyzine Editor
    October 4th, 2023
  • When it comes to withdrawal rates from a retirement account, the rule of thumb is 4% of the starting balance without fear of depleting the account. This rule of thumb has been around for quite some time, and many individuals might be wondering if these old rules still apply today. Using the correct rate is important, because the retiree needs to balance the risk of running out of money with living too frugally in retirement. In this article, we're going to help answer the question: How much can I withdraw from my retirement account each year? That answer will...
    Moneyzine Editor
    Moneyzine Editor
    October 4th, 2023
  • Anyone working for more than ten years has probably daydreamed about retiring early. But everything is relative, and 35-year-olds are going to have a different definition than a 45-year-old. And what exactly is retirement anyway? Does that mean switching jobs, or completely checking out of the working world?
    Moneyzine Editor
    Moneyzine Editor
    October 4th, 2023
  • Retirement Planning in Your 20s
    To the young, it might seem crazy to create an article that talks about retirement planning in your 20s. Admittedly, to most 20-somethings, retirement is so far away that it occupies very little of their thoughts. But the reality is a time will come when these "youngsters" will retire too.
    Moneyzine Editor
    Moneyzine Editor
    November 20th, 2023
  • Retirement Planning in Your 30s
    If we had to summarize what retirement planning in your 30s is all about, it would probably go something like this: When you're in your 30s, you are in a unique position from a retirement planning standpoint. For most of us, these are the "make or break" years. Here's why.
    Moneyzine Editor
    Moneyzine Editor
    November 20th, 2023
  • Retirement Planning in Your 40s
    Anyone that started their retirement planning early in their career should be in very good shape by the time they reach their 40s. Individuals planning for the first time may be faced with serious catching-up to do. That being said, starting a plan in your 40s is perhaps the single most important step someone can take to prepare themselves for the future.
    Moneyzine Editor
    Moneyzine Editor
    November 20th, 2023
  • Retirement Planning in Your 50s
    If there is ever a critical time for retirement planning, it's when you hit your 50s. You still have ten to fifteen years left in the workplace, and you're entering your peak earning years.
    Moneyzine Editor
    Moneyzine Editor
    November 20th, 2023
  • Selling Pension Benefits
    A poorly performing economy often forces people to look for short term sources of much needed cash. That's one of the reasons selling pension benefits is growing in popularity. But before entering into any agreement to sell a pension, it's important to understand the real cost of these loans. In this article, we're going to talk about pension selling programs. As part of that discussion, we'll differentiate between retirement income and loans. Next, we'll describe the typical structure of these deals, eligibility, and the life insurance requirements that may be placed on pensioners. Finally, we'll summarize the pros and cons...
    Moneyzine Editor
    Moneyzine Editor
    November 20th, 2023
  • When leaving a job, it's tempting to pull money out of a 401(k) account. In fact, studies conducted by some of the leading benefits administrators indicate that nearly 50% of employees take the money out of their retirement account when they leave their jobs. That statistic is unnerving, because cashing out a 401(k) plan can be expensive in the long run.
    Moneyzine Editor
    Moneyzine Editor
    October 4th, 2023

Contributors

Moneyzine 2024. All Rights Reserved.