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7 money mistakes you should avoid in your 60s

By the time you’ve hit your 60s, you should be in full-on financial protection mode. You’ve spent decades building up your nest egg and the time has finally come to start planning your exit strategy.

The sooner you start, the better. Americans tend to overestimate how long they’ll be able to keep up their 9-to-5 lifestyle when they hit their 60s. The average worker today expects to retire at age 66, according to Gallup, but the actual average retirement age in the U.S. is a relatively young 62. (This shouldn’t come as a big surprise — 62 is when workers can begin drawing Social Security.)

To help you make sure your retirement savings outlive you — rather than the other way around — here are seven common money mistakes you should avoid in your 60s.

Investing like you're in your 20s

It’s important to adjust your retirement portfolio’s asset allocation as you build it. In your 20s and 30s, sinking the bulk of a retirement portfolio in stocks and stock mutual funds is sensible, but extreme levels of equity holdings in your 60s is too risky, most financial planners say. Now is the time to make sure you’re not overexposed to equities.

There is some variance among the pros as to what the exact stock-to-fixed-income mix should be, but Helen Stephens, a CFP in Fort Worth, Texas, who specializes in retirement planning, typically recommends a 50-50 stocks-to-fixed-income asset allocation for clients who are nearing retirement. (Mutual fund giants like T. Rowe Price, Charles Schwab and Fidelity have similar guidelines for age-based asset allocation.)
 
“This is contrary to the old way of thinking, which was one should have their age in bonds,” Stephens says. “The equity exposure is what will help them maintain their buying power over time, since many will be retired for 30-plus years potentially.”
 
Sit down with your retirement planner or, if you don’t have one, arrange a meeting with a fee-based financial advisor to review your portfolio and make the necessary adjustments. That could be as simple as shifting the majority of your savings into bonds and leaving a smaller chunk in the market.

For women, not taking into consideration longer life span

There’s a high chance that women will outlive men (the average 65-year-old woman today will live past 86 vs. 84 for the average man), which makes it much more likely for women to be widowed. Forty percent of women over age 65 were widowed in 2010, compared to 13% of men. And given the fact that women historically earn less than men, there’s a strong likelihood that they will wind up with lower Social Security benefits and therefore end up with less in retirement. Women who are married should make sure they are equal partners in the retirement planning process and know exactly how to manage should their spouse or partner pass way.

To protect yourself, make sure your partner has made you their 401(k) or IRA beneficiary and their life insurance policy. You’ll also need to know exactly where to find important financial documents like your estate plan and know how to access any documents that might be stored digitally. Know that you’ll also qualify for survivor’s Social Security benefits if you're married and your partner dies before you, even if you decide to remarry.

Claiming Social Security too early

Once you’ve hit your 60s, the temptation to begin drawing on Social Security benefits is understandably hard to resist. For your own good, resist it. After you reach full retirement age, your annual benefits will grow by 8% each year up to age 70. That kind of return is hard to beat.

And those gains truly add up. For a worker who retires in 2014, the difference between the average monthly Social Security benefit at age 62 and age 70 is $1,433 — more than $17,000 a year. For spouses, it may make sense to start drawing on the lower-earning spouse’s benefits when they reach age 66 and defer the higher-earning spouse’s benefits until they reach age 70. That way, you can satisfy the urge to claim your benefits while still letting the larger benefit grow.

Forgetting about long-term care insurance

There’s a reason why nearly 80% of long-term care for the elderly is provided by family members. It can cost upwards of $6,700 a month for standard nursing home care and unless you’ve either got deep pockets or a family willing to pick up the tab, it’s very likely you may be able to afford it without long-term care insurance. Nursing home care isn’t covered by Medicare either.

In her book, “The Charles Schwab Guide to Finances After 50,” Carrie Schwab-Pomerantz says that without long-term care insurance “your retirement savings could be in jeopardy.

Think about purchasing a life insurance policy that comes with additional long-term care coverage, or buy a fixed or variable annuity with additional long-term care coverage.  

Upgrading your standard of living

With the kids out of the house and retirement right around the corner, the absolute worst way to celebrate is by relaxing your budget.

Michael P. Miller, a CFP in Midlothian, Texas, says far too many of his clients let “empty nest syndrome” put their retirement at risk.

“Many [people in their 60s] make the mistake of upping their standard of living when their children are grown and out of college instead of using this freed up cash flow to save for their retirement,” Miller says. “This can lead to them running out of money before running out of time.”

If you began saving later in your career, now may be the time to play catch-up — not planning back-to-back vacations. For people older than 50, the government allows catch-up contributions (savings that surpass the annual limit of $17,500) of up to $5,500 per year in 401(k) plans that offer them.

Not having a will or estate plan in place

There’s a reason we’ve mentioned some form of estate planning in every article in this series — an estate plan is one of the most important forms of financial protection you can provide, not only for yourself, but your family as well. If you drew up a living will or end-of-life documents in your 40s or 50s, it’s worth revisiting them, especially if you’ve gotten divorced or remarried since then. Meet with an attorney to hammer out a complete estate plan. This is a list of documents that includes your will, an advance medical directive, a living will and also designates a financial power of attorney. At the very least, draw up a living will, which will dictate how you want your end-of-life care to be handled if you’re too ill to communicate your wishes.

An estate plan doesn’t just ensure that you will receive the kind of end-of-life care that you want. It will also make life easier for your family after you pass away and prevent the kinds of familial squabbles that can arise when ownership of assets like a home isn’t put into writing. 

Retiring without a transition plan  

In addition to making sure you’re financially ready to leave the workforce, you should also make sure you’re mentally prepared and you have an idea of what you’re going to do. The first few weeks of retirement may seem like a long overdue vacation, but if you haven’t properly planned a way to fill your time, you might actually wind up feeling bored, or worse, depressed. Retirement actually increases your risk of depression by 40%.

Nick Ventura, wealth manager in Ewing Township, N.J., tells his clients to practice reciting what they plan to do after they’ve been retired for three months, six months and 12 months. Picking up a new hobby or volunteering can help fill the hours you might have otherwise been in an office, but making sure to stay physically and socially active is important, too.

Got a question about retirement? Email us at yfmoneymailbag@yahoo.com. And be sure to join us at 2 p.m. ET Friday on Facebook to talk about retirement strategies and the money mistakes you shouldn't make in the crucial years before you retire. We'll be chatting with Yahoo Finance's Mandi Woodruff, the AARP's Jean Setzfand and Money editor-at-large Penelope Wang.  

We've got you covered for every decade:

7 money mistakes to avoid in your 50s

7 money mistakes to avoid in your 40s

7 money mistakes to avoid in your 30s

7 money mistakes to avoid in your 20s