Savings Strategies for Individuals Near Retirement

3. Know your government benefits.

Depending on when you retire, you may be eligible for Medicare and Social Security benefits. Medicare is a health insurance program offered by the federal government, which can help qualified individuals pay for the costs of certain health care expenses and medical services. Generally, retirees who are 65 years or older can sign up for Medicare.

You may sign up to receive Social Security benefits three months before you turn 62 – this is the earliest you can begin to collect payments. But as with other things in life, just because you can doesn’t necessarily mean you should. If you choose to collect benefits at 62, you will only receive a reduced portion of your “full retirement” benefits.

To be eligible to receive your full (read: unreduced) retirement benefits, you must wait until you’ve reached your full retirement age. The Social Security Administration (SSA) determines your full retirement age by the year you were born. So for example, if you were born before 1937, your full retirement age is 65. But if you were born in 1960, your full retirement age is 67.

Consider delaying Social Security benefits even after you’ve reached your full retirement age to maximize your benefits. That’s because the SSA will increase your Social Security payments by a set percentage for each year that you postpone your benefits (up until you turn 70). Visit the SSA webpage for more details.

Medicare and Social Security benefits can help defray certain expenses and provide supplemental income during retirement. So it’s important to review your eligibility status and plan accordingly. Remember, you’ve paid into these funds during your working years, so don't leave your benefits hanging out there.

4. Get smart on taxes.

We’re not expecting you to start a second career in your retirement as a CPA. But knowing your tax obligations when you withdraw money from your retirement accounts can save you from some unpleasant tax surprises.

Generally, you can withdraw money from your Roth IRA with no taxes or penalties when you reach the age of 59½ (assuming you’ve had the account for at least five years). With a traditional IRA or 401(k) plan, on the other hand, you typically have to pay income taxes on your withdrawals.

When it comes to taxes, there are always exceptions and special rules. Not to mention that the tax treatment of different types of retirement accounts can be complex. So it’s a good idea to check in with your financial advisor and tax preparer to discuss ways to minimize your tax hits in retirement.

5. Make that estate plan.

You may think only the ultra-wealthy need an estate plan. But if you own anything at all (e.g., real estate, financial accounts, furniture of questionable taste, etc.), you might consider putting together an estate plan.

Estate planning allows you to have an official say on who gets what and when after your passing. It’s about letting your family know your wishes and protecting them from any potential financial difficulties (and infighting) down the road.

Broadly speaking, getting your affairs in order can involve drawing up a will, assigning powers of attorney (this allows a designated person to legally act on your behalf), which can include an advance medical directive (this conveys your wishes regarding medical treatment if you are incapacitated).

Estate planning can be a stressful undertaking. But the key is to organize all your personal and financial records and then sit down with your family to discuss and convey your wishes in advance. When it comes to preparing for the end of life, an estate plan ensures that you are the one in control of your personal affairs and financial matters. If you don’t make these decisions, however difficult they may be, the probate laws in your state will decide for you after you die.

Bottom line

When you think about how you’re going to spend retirement, you might picture yourself kicking back on some beach, traveling the world or volunteering more in your local community. The possibilities are endless and that’s what’s so exciting about the next chapter. However you choose to spend your golden years, now is the time to check up on your finances, shift your savings into high gear and get yourself across the finish line.