By the time you reach your 60s, retirement is fast approaching. Many people choose to leave the workforce in their 60s, and that’s when you’re entitled to your full monthly Social Security benefits.
But it’s important to approach retirement with a decent level of cash savings. The reason? Once you retire, you probably rely on your IRA or 401(k) to pay for some of your expenses. But the bulk of your IRA or 401(k) can be invested in stocks, bonds, and other assets whose value can fluctuate with market conditions.
What you don’t what you want to do in retirement is to liquidate investments when their value has fallen. This means locking in losses and exposing yourself to the risk of exhausting your nest egg prematurely.
That’s why it’s a good idea to have a decent amount of money in your 60s. And if you’re curious how you’re doing compared to your peers, recent data from Personal Capital might give you an answer.
What has the typical 60-year-old saved up?
The average savings balance for people in their 60s is $72,834. It can seem like a lot of cash to have in cash. And earlier in life, maybe.
But as a general rule, when you’re already retired or about to retire, it’s good to have enough cash on hand to cover one to two years of living expenses. This way, you can potentially ride out a market downturn without selling investments at the wrong time.
So let’s say you have about $72,000 in your savings account and you spend $4,000 a month on living expenses (and expect to continue doing so in retirement). In this case, you have 18 months of cash spending, which means you’re in pretty good shape.
Of course, you can also have a portion of your IRA or 401(k) in cash, and that money can also count towards your emergency cash reserves for retirement. So let’s say you spend $4,000 a month but only have $48,000 in cash savings. That’s a year’s worth of bills, which is the lower end of what you’ll typically need. But you can also have an extra $50,000 in cash in your IRA or 401(k), in which case you should be fine.
Should you put money aside in your savings during your 60s?
If your savings need a little boost, then it’s worth filling up your cash reserves. But remember that IRAs and 401(k)s offer tax advantages, unlike a savings account. Traditional IRAs and 401(k)s, in fact, give you tax relief on the money you put into your account, and that’s a benefit you don’t want to pass up. So if you’re still working at this point in your 60s, go ahead and try to max out your IRA or 401(k), or get as close to it as possible.
Remember that you can put money into an IRA or 401(k) that you leave in cash. And if you’re in your 60s, you’re old enough to withdraw from one of these accounts without penalty. This means you don’t have to worry about that money not being available in a savings account.
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