How To Invest in Your 60s

Your 60s are when most of us will sunset our careers and fully realize the outcome of our investments and planning. 

I’ve heard your 60s described as a plane coming in on final approach. The analogy is apt; once you’re airborne, a landing is going to happen one way or another. 

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A Pre-Retirement Checklist

In aviation, any landing you can walk away from is considered a good one, but in retirement planning you can do better than just limping away from the wreckage. 

A pilot on final approach will run through a checklist to ensure they haven’t forgotten something vital and have a plan should they need to select an alternate airfield altogether. 

Likewise, you should run through your own checklist and contingency plans for retirement.

If you’ve done retirement planning early in your career, you most likely used broad concepts and generalized “rules of thumb.” There is nothing wrong with that — after all, in your 30s or 40s who could know the future? 

In your 60s it’s different. You have good data and your time horizon is short enough that detailed planning is possible. 

With your retirement approaching, the time for “rule of thumb” is over. It’s time to crunch real numbers. 

Spending in Your 60s

Fundamental to any retirement plan is simply knowing how much money you need to spend to support your lifestyle. 

Almost no one starts planning with an accurate picture of their real spending. That’s like planning a trip across the country without knowing your gas mileage. 

When it comes to living from your savings, your burn rate will determine whether your plan works or doesn’t.

Younger people who are tackling debt or saving for a big goal like a home know they should track their spending. But it’s a practice that most people in middle age abandon. That’s a mistake — especially when technology makes it effortless. There are budgeting apps that make tracking spending seamless. 

If you start your retirement planning with several years of real spending data, your chance of success increases exponentially.    

READ MORE: How Much You Need to Retire

Your 60+ Portfolio

Also fundamental to retirement planning is your pre-retirement savings rate. How much money you save across retirement accounts, emergency funds, or as liquid savings will inform your plan. 

Do you need to use the last few years of your career to accelerate savings or have you saved enough and can divert future savings to other goals like eliminating low-interest debt? 

Your savings rate will determine how long either of those options takes.

You also need to review your asset allocation to determine if you’re taking on too much or too little market risk. 

Too much risk could leave you depleting a portfolio too quickly in a bad market while too little may leave inflation stripping away your purchasing power. 

Your brokerage will have an easy-to-understand chart showing your asset allocation. At 60, you likely need to be more moderate in your approach to risk.

Don’t forget about taxes

You also need to assess the tax location of your funds. Ideally, you should have funds in traditional pre-tax retirement accounts, post-tax advantaged accounts like a Roth, and a taxable brokerage account. 

Each has unique tax treatments and restrictions and the last years of your career are the perfect time to put funds in the most advantageous account possible. 

Taxes are the most expensive thing you’ll ever pay throughout your life, so make it as efficient as possible.

Income in Your 60s

You need to determine what sort of income your investment portfolio can provide and how long it can do that while you consume it in retirement. 

You also need to determine what sort of volatility you can expect from year to year. 

The “4% Rule” is a popular rule of thumb, but you should use actual data for detailed planning in your 60s.

Social Security is frequently overlooked in early retirement planning, but by your 60s you will want to include it. You can go to SSA.gov and generate actual data on what your Social Security income will be, at what age, and the various rules for collecting it. 

There are a number of strategies for when to collect social security based on your current savings and income needs as well as an overall prediction of your longevity.

Don’t overlook any old pensions you may have had much earlier in your career — you may still have some benefits to claim. 

Also, include any part-time work or rental income that will apply to your situation.

Healthcare Coverage in Your 60s

You will need to determine what kind of healthcare coverage you will have in retirement. 

In the United States, healthcare coverage is most frequently tied to your employer. Healthcare coverage in retirement will be two broad categories: 

• Pre-Medicare options include COBRA coverage, Affordable Care Act coverage, or private insurance options. 
• Medicare eligibility for most people begins at 65 with supplemental plans and coverage options available. 

You should also consider long-term care insurance. 

For people turning 65, 48% will require some form of paid long-term care in their lives and 24% will require paid long-term care in excess of two years, according to Morningstar. 

The costs can be significant and aren’t covered by Medicare. Medicaid eligibility typically requires spending down assets before covering any of the costs. 

Long-term care insurance options include both traditional policies and hybrid policies with a whole life plan attached.

Managing Risk in Your 60s

The ongoing risk to a successful retirement plan is cash flow. Detailed spending and income data reduce this risk — many people are too optimistic about how much they will cut spending in retirement or too optimistic about returns. 

Your retirement spending is going to most likely mirror your pre-retirement spending.

Involuntary retirement is another risk to be aware of. 

Most of us think we’ll retire around age 67, which is the age for receiving full Social Security benefits.

But according to a Transamerica study, the average retirement age in the U.S. is 62 — and half of those retired under duress due to health or economic factors. 

When planning for retirement, the data would indicate you should at least plan to retire significantly earlier than you think you will. 

Mark Twain is credited with saying, “It isn’t only what you don’t know that gets you into trouble, it’s what you know that isn’t so.” Gaps in your knowledge are a risk. Retirement planning is neither simple nor easy. 

While many people prefer a DIY approach, there are “advice-only” certified financial planners who will review your plan and help you perfect it for an hourly or flat fee. 

Before cutting the cord on full-time employment, a few thousand dollars for expert help is worth considering. 

FAQs

What investments are best in your 60s?

In your 60s, you should be managing risks through a balanced asset allocation of stocks, bonds, and cash reserves. Target-date funds are designed with age-appropriate risk management. 

Moderate portfolios with stock-to-bond ratios of 50/50, 60/40, and 70/30 have been the staples of retirees for decades. 

But your asset allocation will also be based on personal factors like risk tolerance, risk capacity, portfolio needs, and your financial goals.

How much should you have saved in your 60s?

The long-standing advice is that you should have 8x your income by the time you’re 60, with your investments growing to 10x by 67. 

That advice is based on Fidelity’s 45% Rule, which aims to have 45% of your pre-retirement income replaced from your investments. 

The remaining replacement is from Social Security and varies based on your income during your career.

TL;DR: Investing in Your 60s

Your 60s are an exciting time of transition. Executing a well-planned and graceful exit from your career and launching into the next phase of life takes skill and forethought. 

But just like a pilot landing a plane, use a checklist to make sure you’re paying attention to all of the vital parts, managing your risks, and perhaps even using a copilot to make sure you get there in one piece. 

For more investing advice at any age, check out these episodes of the Erika Taught Me podcast:

• Investing Advice from the Most Powerful Woman on Wall Street
• The Missing Piece in 99% of Financial Advice
• 10 Steps Towards Financial Wholeness

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