“Maximizing Your Retirement Savings: A Guide for Seniors”

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Update Your Financial Goals

As you transition into retirement, your financial goals will likely change. You might want to travel more, move to a new home, retire abroad, take up new hobbies, or support your children or grandchildren financially. Start by clarifying these goals and estimating their costs. A financial advisor can help you create a plan to draw on your savings efficiently and minimize your tax burden.

Clarify Your Costs

Understanding your expenses is crucial, especially if you’re on a fixed income. Break down your costs into essential expenses like rent or mortgage, utilities, food, and debt payments, and discretionary spending such as dining out, shopping, and traveling. Consider how your financial goals and potential increases in housing and medical costs will impact your budget. If necessary, reevaluate your expenses or adjust your goals.

Plan for Health Care Expenses

Health care costs can be significant in retirement. According to Fidelity Investments, a 65-year-old retired couple may need around $315,000 for health care expenses. Medicare doesn’t cover everything, so you’ll need to account for premiums, deductibles, copays, and other out-of-pocket costs. If you have a health savings account (HSA), you can make tax-free withdrawals for qualified medical expenses. Consult a financial professional for strategies to cover these costs, such as moving assets into an irrevocable trust to qualify for Supplemental Security Income (SSI) or Medicaid.

Manage Your Budget

Budgeting is essential, especially if you’re on a fixed income. List all your income sources, including 401(k)s, IRAs, pensions, Social Security benefits, annuities, and passive income from investments. Be strategic about drawing on your savings to avoid a significant tax bill. Look for senior discounts on various expenses and use a budgeting plan or app to live within your means.

Don’t Forget About Taxes

Withdrawals from tax-deferred retirement accounts like 401(k)s or traditional IRAs are considered taxable income and can lead to a substantial tax liability. Diversify your income by combining funds from tax-deferred accounts and Roth accounts, which offer tax-free withdrawals. Remember to start taking required minimum distributions (RMDs) from tax-deferred accounts at age 73. Seniors can also benefit from additional standard deductions, Social Security tax exemptions, and elderly tax credits.

Update Your Estate Plan

Estate planning involves organizing your assets and planning their distribution after your passing. Update your will, choose powers of attorney, and establish trusts to help your loved ones avoid probate. You can also distribute trust assets during your lifetime if you choose.

Avoid Scams That Target Seniors

Seniors are often targeted by scammers, with the average victim losing over $33,900 in 2023, according to the FBI. Protect yourself by never sharing personal information with unsolicited contacts, using multifactor authentication, and consulting friends or family if you’re suspicious about a contact. Report fraud to the Federal Trade Commission (FTC) at ReportFraud.ftc.gov and consider identity theft protection services.

The Bottom Line

Financial planning doesn’t end with retirement. Budgeting, paying taxes, and working toward financial goals are lifelong habits. Seniors have unique planning needs that may require professional assistance. For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We’re here to help you navigate your financial journey with confidence.

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