Editor's Note: "Retirement Savings on Track? How Much You Should Have by 61 and 65" is part of a series on retirement savings by age. The first story is "Retirement on Track? How Much You Should Have by 50 and 55." The second is “Retirement Savings on Track? How Much You Should Have by 55 and 60.”
Save early and save often is the mantra we’ve been hearing since we entered the workforce. After all, the earlier you start saving for retirement, the more you’ll be able to enjoy your golden years.
If you’ve adhered to that advice diligently, or even if your life veered off course, everyone has a magic number that will ensure a comfortable retirement.
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That becomes more important as we approach retirement in the 61 to 65 age range. After all, this is the time when you are taking the final steps to prepare for a retirement that can last decades.
Not sure what your magic number is supposed to be? JPMorgan has put together a guide of how much adults should have saved based on age and income. Previously, we looked at adults in their early 50s and mid-50s to early 60s. This time, we are highlighting those in the ages between 61 and 65.
The Wall Street bank’s model assumes a 5% annual gross savings rate, a pre-retirement portfolio of 60% equities and 40% bonds, a post-retirement portfolio of 40% stocks and 60% bonds, an inflation rate of 2.4%, a retirement age of 65 and 35 years in retirement.
Keep in mind that these amounts are a general guide. Everyone’s financial situation is different, and some may need more or less in retirement.
Are you on track with your retirement savings?
See how you stack up below:
Age: 60
Income: $80,000
How much should you have saved: $520,000
Age: 60
Income: $100,000
How much should you have saved: $725,000
Age: 60
Income: $150,000
How much should you have saved: $1.045 million
Age: 60
Income: $200,000
How much should you have saved: $1.33 million
Age: 60
Income: $250,000
How much should you have saved: $1.68 million
Age: 60
Income: $300,000
How much should you have saved: $2.18 million
Age: 65
Income: $80,000
How much should you have saved: $615,000
Age: 65
Income: $100,000
How much should you have saved: $890,000
Age: 65
Income: $150,000
How much should you have saved: $1.28 million
Age: 65
Income: $200,000
How much should you have saved: $1.64 million
Age: 65
Income: $250,000
How much should you have saved: $2.07 million
Age: 65
Income: $300,000
How much should you have saved: $2.67 million
Things to consider in the run-up to retirement
During the runup to retirement you should not only be refining your financial plan but making sure it takes into account Medicare, something you probably weren’t worried about in your early 50s or even late 50s.
Medicare kicks in at 65 but Sharon Carson, executive director of J.P. Morgan Asset Management, says it's something you should be thinking about well in advance of that.
“Before you reach 65, decide on your Medicare choice, whether it’s original Medicare with Medigap or Medicare Advantage," says Carson. Which one is right for you depends on your health, flexibility and cash flow.
All Medicare providers accept Original Medicare, but it typically has higher out-of-pocket costs. To help cover out-of-pocket expenses such as deductibles, copays and coinsurance, you may need a Medigap plan. Plus, Medicare Part D, which covers drugs, will also have co-pays and deductibles associated with it.
Medicare Advantage may be cheaper but the providers are limited to those in network. If you have a preferred doctor who is not in the network, you are out of luck.
Estate planning should be on your mind
Beyond worrying about Medicare, estate planning should also be on your mind between the age of 61 and 65. Even if you don’t have a large estate you plan to bequeath to your heirs, it's important to make sure your will is updated.
That’s particularly true if you are moving out of state. You want to make sure your will adheres to the laws of the new state you reside in.
In addition to your will, Carson says it’s important to think about who will make your health decisions and take care of your finances if you become incapacitated.
Nobody wants to think about what could go wrong, but Carson says if you haven’t done so, now is the time to talk to an elder care attorney about the tools at your disposal to maintain control of your health care decisions, including designating a durable power of attorney.
This is a legal document that appoints another person to make financial, legal and medical decisions when you no longer can.
Is a Roth conversion right for you?
In your early 60s is also a good time to consider if a Roth conversion is right for you. This occurs when you move money out of a traditional IRA or 401(K), 403(b) or 457(b), pay taxes on the withdrawals and shift it into a Roth IRA to enjoy future tax-free growth. Beyond the potential for tax-free gains, Roth IRAs have no required minimum distributions (RMDs) and allow tax-free withdrawals after five years and the age of 59-1/2. It makes most sense when you think you’ll be in a higher tax bracket in retirement.
“Roth conversions often work well after retirement but before taking Social Security,” says Carson, noting that conversions don’t have to be done all at once but can be spread out over multiple years.
Be mindful of a big Roth conversion's potential impact on your Social Security and/or Medicare, cautions Carson.
The Medicare Income-Related Monthly Adjustment Amount (IRMAA) is an additional premium charged for Medicare Part B and Part D if your income exceeds certain thresholds based on your Modified Adjusted Gross Income (MAGI) from two years prior.
Don’t get overwhelmed into inaction
If you face retirement shortfalls or are overwhelmed by your checklist in the run-up to retirement, don’t let paralysis set in. The last thing you want to do now is bury your head in the sand and hope it goes away.
If your savings need a boost, you can always work longer, save more in your retirement savings account or plan to work when you do retire.
Downsizing or curbing your budget may be all it takes. And remember, JPMorgan’s guide is exactly that. You may be able to make it work with a lot less than what you are supposed to have saved by 60 or 65.
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