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David Lerner Associates: Financial Planning in your 60s

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Friday, October 30, 2015

In order to retire at age 65, you will likely need to have accumulated a sizeable retirement nest egg by the time you reach your early 60s. So, this is the time to take a careful look at your portfolio, and start making some projections about whether you will have enough money to stop working (and earning income) on the date you’ve targeted for retirement.

And don’t forget to factor in other possible sources of retirement income, such as an employer pension plan and/or cash value from a permanent life insurance policy.

Financial Resolution #1: Start to narrow down a target retirement date. There is no official retirement age in the U.S., though 65 has often been considered a desired retirement age, if you have the financial resources to do so. Currently, the full Social Security benefit age is 66 for people born in 1943-1954, and it will gradually rise to 67 for those born in 1960 or later. [1]

Financial Resolution #2: Begin planning your retirement budget. One budgeting strategy is to plan on needing between 70-80 percent of your pre-retirement income during retirement. This is based on the assumption that you will no longer need to support children, you may have paid off your home mortgage, and you won’t have employment expenses like clothing, commuting, eating lunch out, etc.

However, these “savings” can easily be offset by unknown variables and additional unplanned expenses, especially if you plan to live an active retirement lifestyle. The future cost of healthcare is an especially big unknown. If you want to travel extensively, entertain and eat out frequently, or participate in expensive hobbies during retirement, be sure to factor these costs into your retirement cost-of-living budget.

Also, don’t forget to factor the effects of inflation into your retirement budget. Over time, inflation erodes the value of your money and reduces your purchasing power. As a result, a dollar in ten years will likely buy you less than a dollar today. What cost $1 in 1990 would cost you almost double that today ($1.82). [2]

Financial Resolution #3: Make adjustments to your asset allocation mix. Now that you are approaching retirement age, it may be wise to begin shifting your asset allocation mix to lessen exposure to investments that may be more volatile in the short term (like equities) and increase exposure to those that generally have less volatility, such as fixed-income investments (like bonds) and cash equivalents.*

The idea is to manage your savings and investments in a way that will help protect rather than grow your income and principal, as you prepare to pass from the accumulation to the withdrawal phase of retirement planning.

Financial Resolution #4: Start thinking about your retirement lifestyle. Here’s a bonus resolution that really isn’t financial, but is very important at this life stage. Many people enter retirement with no idea of how they will spend their time. Start thinking now about the activities and hobbies you want to pursue when you retire.

It doesn’t really matter what they are — the important thing is that you have a plan designed to keep your mind and body active and sharp.


*Bond prices move inversely to interest rates. Long-term bonds are more exposed to interest rate risk than
short-term bonds.

Duration is the risk associated with the sensitivity of a bond’s price to a one percent change in interest
rates. The higher a bond’s duration, the higher its sensitivity to changes in interest rates.

Investors who decide to sell prior to a call or maturity date may receive more or less than their original investment depending on market conditions and any mark-ups or mark-downs to the price of the bonds.

Many municipal bonds contain call features which allow for the bond to be recalled or retired before maturity at the discretion of the issuer.

Credit risk—This is the risk that an issuer will default or be unable to make payments. The credit of the bond is backed by the municipality issuing the bond. The issuer of the bond must remain solvent in order to pay investors. Investors should consult with their investment counselor as to the credit risk or risk of default with a particular issuer.

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable-- we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC.

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Founded in 1976, David Lerner Associates is a privately-held broker/dealer with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Lawrenceville, NJ; and White Plains, NY. For more information contact David Lerner Associates Call 800-367-3000 Visit our website: www.davidlerner.com

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