Once you hit your 60s, it's time to figure out when you want to retire — and whether or not you can make it happen.
By the age of 67, which is when people born in 1960 or later can fully retire on Social Security, you should have 10 times your final salary saved, according to Fidelity Investments.
Of course, during times of financial stress, such as the coronavirus pandemic, it may be hard to save. In fact, 84% of U.S. adults expect the crisis to impact their ability to achieve long-term financial security, according to a Northwestern Mutual survey.
Now is a good time to take a look at what you have, what you'll need in retirement and what you have to do now to get there.
There are also common mistakes people tend to make while nearing retirement.
Just because you are in your 60s doesn't necessarily mean to automatically sell stocks and buy more fixed-income assets, which are considered less risky.
"One of the biggest mistakes I see people make when they get close to retirement is to totally reduce the equity exposure in their investment portfolio," said certified financial planner Tom Henske, a partner at New York-based Lenox Advisors.
"That money has to last a long time, and it has to grow with inflation."
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These days, the stock market has been volatile, but Treasury yields are also near historically low levels. If you are heavily weighted in Treasurys, your portfolio won't necessarily keep pace with inflation.
He suggests creating mental buckets of assets: very short-term, midterm and long-term. When the markets go down, don't touch the long-term.
As retirement nears, you'll want to make sure you are maximizing your 401(k) or individual retirement account contribution and decreasing your debt and spending, said Winnie Sun, co-founder and managing director of Sun Group Wealth Partners, based in Irvine, California.
"Take a look at anything that has double-digit interest and eliminate that," she said. "Ideally, you don't want anything you are paying 5% interest on."
That includes home mortgages. Consider refinancing if your loan has an interest rate above 4.5%, said Sun, a member of the CNBC Financial Advisor Council.
You may feel great now, but you don't know what the future may bring.
That's why it's important to figure out how to pay for any long-term care you'll need down the road. It's also a good time to speak with an elder-care attorney to see what your options are, Sun advised.
"Planning early and having that clarity makes this experience so much easier, because we know many of us will need it in some form or shape," she said.
For Henske, long-term care insurance is a must. If you wait too long to buy it, it will get really expensive, he said.
"The longer you live, the greater the likelihood is you are going to need care," Henske said.
Some people may prefer to self-insure, which means putting money aside to pay for that care. However, if you only start saving at 60, it will be hard to accumulate the money you'll need, Henske warned.
"A long-term care event would devastate your financial plan," Henske said. "You can't afford not to have it."
If you have qualified retirement plans such as a 401(k) or traditional individual retirement account, you must take a required mandatory distribution, or RMD, starting at age 72. That income will be taxed.
You should start thinking about that now, especially if the bulk of your savings is in those plans.
Taxes are likely going higher from here, which will hurt or impact your future retirement income, Sun warned.
"Taxes can go up another 10% pretty quickly."
One thing to consider is converting some of the money in your traditional IRA or 401(k) into a Roth IRA, Sun said.
You'll pay taxes on the amount now, not when you eventually pull it out in retirement. By doing a portion of it this year and a portion in January, it will minimize the tax bite, she advised.
After that, watch the tax rates, since it won't make sense to do the conversion once they start ratcheting up, Sun added.
Also, if you want to move when you retire, look at the different state taxes. Some states, such as Florida, don't have income, inheritance or estate taxes.
At the very least, you'll want to keep active and engaged in retirement. You may also need the extra income.
"We always talk about how when you retire, take out no more than 4% of your retirement assets," Sun said.
"But really that number should be lower, especially now," added Sun, referring to the expected bump in taxes.
Don't forget to be prepared for an emergency.
Compile a financial first-aid kit, which should include all of your financial statements, such as tax documents and Social Security statements; estate documents, such as wills; an emergency fund of at least three to six months of living expenses; documentation of your insurance policies, such as health, auto and home; and a list of all phone numbers and passwords to your accounts.
Sun recently needed to access her father's financial first-aid kit when he landed in the hospital after an accident.
"Everyone should do it," she said.
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