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 retirement planning, you don't ever want to 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 retirement planning overtime by the time we're in our 60s.  That's a pretty 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 you have two things working in your favor.  The first is that most of your larger household expenses should be out of the way or paid off.  Secondly, you're at or near your 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 you have been ignoring your retirement plans.

Getting Ready for Retirement

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

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 it pretty easy for you.  We have ten different retirement calculators that can provide a wide range of help including:

• Figuring out how much retirement funding you'll need.
• Calculating the growth of your retirement funds over time.
• The benefits of using a Roth IRA or a Traditional IRA to fund your retirement years.
• And even getting a feel for how much retirement income you'll need.

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 retirement income, even if you only have five years left until you stop working.

Retirement Saving Example

In this particular retirement plan 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 your income after retiring.

Impact of Retirement Savings

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 savings were placed into retirement plans for the next five years, then these two sources of income would replace only 63% of their before-retirement income.  This is well below the 70 to 80% retirement 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 retirement funds, 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 you can create your own scenarios.  The calculations in the above example were all performed using our retirement savings calculator.

Saving for Retirement in Your 60s

We hope that 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 of you just tweaking your retirement 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, you have to decide what type of retirement account you're going to fund.  For example, should you put your money in a 401k plan, or is a Roth IRA better in your situation?

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

60 Year Olds Playing Catch Up

Finally, if you find yourself in the situation where you need 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.  So they certainly apply to 60 year-olds too:

• 401k Plans:  In 2011, you can contribute up to $22,000 to a 401k plan, which includes a $5,500 catch up limit.  In 2012, you can contribute up to $22,500 to a 401k plan, which includes a $5,500 catch up limit.  For more information on future limits, look at our publication on 401k contribution limits.
• IRA (including Traditional IRAs and Roth IRAs):  In 2011 and 2012, you can contribute up to $6,000, which includes a catch up limit of $1,000, to a Traditional or Roth IRA.

Finally, make sure you stay informed of the retirement planning options your company offers.  In 2007 and 2008, many companies began introducing the Roth 403b plan and Roth 401k plan, which provides employees with the combined benefits of each of these accounts.

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