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When it comes to a plan for retirement, your 70s are generally treated as though you're either retired or incredibly close to getting there. Once you hit 70, your Social Security benefit stops increasing based on you choosing to delay claiming benefits.Not only that, but you're no longer eligible to contribute to traditional IRAs once you've reached age 70 and a half, but you can still contribute to your Roth IRA if you meet the income eligibility rules.
In addition, once you reach age 70 and a half, you are required to start taking mandatory distributions from your traditional IRAs and from any 401(k) plans you have unless you are still employed by the company sponsoring the 401(k) and own less than 5% of that company.While those mandatory distributions can get large over time, they start out at a mere 3.65% of your account balance, giving you time to manage that transition.
What if you haven't finished your plan for retirement in your 70s?The rules around retirement planning view you as generally retired by the time you reach your 70s, but not everyone that age has a fully funded nest egg. If you find yourself in your 70s and unable to call it quits financially, don't despair. You can still retire, but it may not be quite as soon or quite as rich as you had originally hoped. Key things you can do to improve the retirement you do get include:
Bank your Social Security: Once you've reached age 70, you no longer get any benefits of waiting to collect your Social Security. So if you're 70 or older and still working, start collecting your Social Security, but don't spend it. Instead, save it, invest it, or use it to aggressively pay down any debts you still have.
Work a little longer: Every year you work is another year you can add more to your nest egg, another year for your money to grow on your behalf, and another year less that your retirement nest egg has to support you. The often touted 4% rule for retirement withdrawals assumes a retirement lasting 30-years. The same study that came up with the 4% rule indicates that you can spend down your nest egg at a far greater rate if you're expecting a substantially shorter retirement -- as much as 8% if you're expecting your retirement to only last 15 years.
Focus on cutting your costs: Many people discover that as they age, they're more willing to spend less on their lifestyle. Indeed, with the likely exceptions of healthcare or assisted living costs, most people's core living expenses drop in their 70s. Thanks to grown children, paid-off mortgages, and the potential for "homestead" exemptions for seniors to lower their property taxes, many of the major expense drivers affecting younger folks no longer apply. The costs you cut today turn into savings you can spend in the future if needed.
Continue to own stocks: In your 70s, it still makes sense to keep a portion of your portfolio invested in stocks, even if you are retired or are planning to retire in the fairly near future. After all, you need your portfolio to last the rest of your life, and over the long haul, stocks typically have the potential for higher rates of return than bonds do. By keeping some money in stocks, you give your nest egg a fighting chance to last as long as you do. Just be sure that you're not relying on your stocks for money you expect to spend in the next few years.
Keep investing new money: Remember that although you may have to start withdrawing money from your retirement accounts, you don't have to spend that money. In addition, there's nothing preventing you from saving and investing new money outside of your retirement plans. While compounding won't help as much as it could have when you were younger, the money you sock away will build your nest egg to help fund your retirement once you are ready and able to call it quits.
Make your 70s the start of the next chapter of your life Even though the structure around retirement accounts expects you to be retired at about the age of 70, you may not be quite ready to call it quits. Whether you're close to the finish line or still have a way to go before you get there, take advantage of those changes to start preparing yourself for the future retirement awaiting you. The sooner you get the plans in place to get you from here to retirement, the better your chances of reaching that retirement while you're still young enough to enjoy it.
The article How to Plan for Retirement in Your 70s and Beyond originally appeared on Fool.com.
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