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At this stage in your life, the FDIC recommends that you continue putting as much as you can into IRAs, 401(k)s, Keoghs and other retirement savings accounts. Once you reach age 50, you can make “catch-up” (extra) contributions to IRAs, 401(k)s, and other retire- ment savings accounts.
If you haven’t bought a house already, consider doing so as a source of equity and a place to live in retirement. If you have a mortgage, periodically compare your interest rate to current market rates. If current rates are lower, you may want to consider refinancing. Also consider the amount you will save if refinancing. After all, a 1% drop in interest rates will save you much more on a $500,000 mortgage than one for $100,000.
As you get closer to retirement, consider reducing stock investments and adding more conservative, income-producing investments. Possible portfolio: 50 to 70 percent in stocks or stock mutual funds and most of the rest in CDs, bonds, bond funds or money market accounts.
As you enter your 60s, Deborah Fowles recommends that you continue to fine-tune your projections and your asset allocations. Obtain an estimate of your Social Security benefits from the Social Security Administration based on your expected retirement date. Benefits are reduced if you take early retirement. Research your Medicare options and be sure to enroll by the time you reach age 65. If you retire before the age of 65, be sure you have medical insurance to cover you until you’re eligible for Medicare.
Fowles says now is the time to start thinking about how you’ll take your retirement assets. Will you consolidate all of your investments for easy record keeping? Will you take a lump sum distribution or an annuity? Because the order in which you withdraw your funds (whether you withdraw interest, dividends, or capital gains first) can have a significant impact on taxes, it may be wise to consult a tax advisor before making this decision.
The Different Stages of Life and their Financial Demands