This is what you should be saving for in your old age. Warner Bros/Courtesy Everett Collection Americans 65 years and older may not have as many job-related costs, such as commuting to an office or work clothes, but they still spend plenty, according to data from the Bureau of Labor Statistics. Housing was their greatest expense, at more than $15,500 a year (and about a 35% share of the household budget). Cash contributions, such as donations and child support, was more than $2,000, the data showed. See: Money milestones: This is how your finances should look in your 50s Out-of-pocket health care cost almost $6,000 (and 13% of the budget). Health-care costs can range, and aren’t always expected, but sometimes are extremely high for retirees. Experts say it’s important to account for health-care expenses when planning for retirement, but it’s still one of the top reasons Americans are anxious about their futures. Experts suggest before someone retires that they consider all their future bills and financial goals, perhaps even living on the budget they expect to use in retirement, to avoid potentially running out of money. And most retirees will tell you their biggest financial regret was not saving enough for retirement earlier. Here’s a breakdown of older Americans’ spending habits, according to the Bureau of Labor Statistics:
Though many of today’s older baby boomers have already retired, a large percentage of younger boomers are now gearing up for their final few working years. Whether retirement is two, five, or 10 years away, if you’ve reached the point where you can start counting down toward the end of your career, here are some key money moves you really ought to prioritize.
1. Complete your emergency fund
In a 2016 GoBankingRates survey, 33% of baby boomers aged 55 to 64 had no money stashed away in savings, while 36% had less than $1,000. Only 17%, in fact, had $10,000 or more. It’s true that if you’ve been saving for retirement and are already 59-1/2, you can access your IRA or 401(k) if you find you need money in a pinch. But if you take a withdrawal at the wrong time, you could end up losing money if you’re forced to sell investments at a loss in order to do so. That’s why, regardless of age, you still need enough emergency savings to cover three to six months’ worth of living expenses. Furthermore, that money should be held in an accessible savings account, where you can withdraw funds at any time without having to worry about a loss of principal.
If your emergency fund is lacking, amassing some extra savings should be your top financial priority. That way, the money will be there for you not only in the near term, but also in retirement, when a big unplanned expense can be much harder to deal with.
2. Ramp up your retirement savings
The benefit of being an older worker is that you get an even greater opportunity to sock away money for retirement. Currently, anyone aged 50 and over can put up to $6,500 a year into an IRA and $24,000 a year into a 401(k). Even if you’ve been saving throughout your career, now’s the perfect time to boost your retirement savings rate because, conceivably, you only have a few more years to fund your account. Furthermore, if you have a 401(k) and your employer offers a match, you’ll get a chance to snag some free money before you stop working altogether.
Also keep in mind that even if retirement is right around the corner, you can still invest whatever additional money you save in your 401(k) or IRA and grow it into an even larger sum. Imagine you have five years left on the job and you manage to max out your 401(k) during that time. If you invest that money and…