Compared to young adulthood, financial planning is generally more complicated for people age 60 and above. There are more decisions to make, some of which are irrevocable (e.g., purchasing an annuity and claiming Social Security benefits) and generally more wealth to manage.
Common financial concerns of older adults include:
- When to claim Social Security benefits
- Required minimum distributions (RMDs) from tax-deferred retirement plans
- Income tax planning for Social Security and RMD withdrawals
- Health insurance, Medicare, and long-term care insurance
- Housing decisions for the remainder of one’s life
- Completing “bucket list” items; e.g., travel and new experiences
Many older adults also experience changes in aspirations and mindsets. For example, they may have increased interest in “giving back” and leaving a legacy and/or a desire to simplify and downsize. Many also think about “lasts” (e.g., last car, last cruise) and start comparing how long new possessions, including pets, might last in relation to their age and life expectancy.
Fifteen financial transitions in later life are described below:
Spending Down Retirement Savings
Admittedly, this is a “problem” everyone would love to have: more money than you know what to do with. However, there is a subset of older adults who led frugal lives and were prodigious savers for decades, thereby amassing large portfolios. In my book, I call them “ants.”
When ants retire, many find it difficult to switch from saving to spending. They’ve been primed to see account balances grow and savings withdrawals feel like a loss. To remedy this, practice spending on large purchases and ask the hard question “If I don’t spend my money, who will?”
Deciding When You Have Enough
Many older adults wonder if they have enough savings to sustain themselves without income from a job or dependence on other people. This includes reaching a number. A 2025 study found that Americans believe they need an average of $1.26 million to retire comfortably. The best way to address “enough” concerns is to try different retirement calculators, including Monte Carlo calculators that estimate the probability of not running out of money during your lifetime.
Creating a Retirement “Paycheck”
One of the biggest transitions people face after they stop working is losing a steady weekly, bi-weekly, or monthly paycheck. As a result, there is a need to create a simulated “paycheck” from savings and other sources to keep receiving income on a regular basis. Options include mutual fund automatic withdrawal plans, a bond or CD ladder, and low-expense annuities.
Taking Required Minimum Distributions
There is one financial transition where there is absolutely no choice. Period. It is the transition from making deposits into tax-deferred savings plans to taking annual withdrawals called required minimum distributions (RMDs) starting at age 73 or 75, depending on year of birth.
To calculate RMDs, divide the balance in a tax-deferred account on December 31 of the previous year by the life expectancy divisor for your age in an IRS table. Withdrawals are taxed as ordinary income and after-tax amounts can be spent, gifted, or resaved in a taxable (brokerage) account.
Later Life Investing
Investors often change their asset allocation and become more conservative as they get older. Asset allocation is the division of an investment portfolio, percentage wise, into different asset classes. For example, 50% stock, 30% bonds, and 20 % cash equivalent assets.
A frequently cited “100-age” formula shows the percentage of stock in a conservative investor’s portfolio, as well as 110-age and 120-age (for moderate and aggressive risk tolerance). Stock weights get smaller as people age and have less time for market gains to replenish losses.
Adjusting to Changes in Income and Expenses
There are only two ways income can change after retirement. Some people transition from a higher to a lower income, as is often the case when they lack meaningful savings and Social Security replaces a fraction of what they earned. Other people go from a lower to a higher income, often when multiple income streams (including RMDs) exceed pre-retirement earnings.
Tax Withholding Challenges
Many retirees have multiple streams of income including Social Security, pensions, annuities, RMDs, part-time employment, dividends and capital gains from taxable accounts, and other sources. The difference, versus earnings from a job, is that there may not be any tax withholding on these income sources. Rather, taxpayers are on their own to monitor their tax withholding and pay quarterly estimated taxes to the IRS, if necessary.
Becoming a Social Security Beneficiary
During their 60s, most older adults start collecting Social Security benefits. Workers who qualify for benefits with at least 40 calendar quarters (i.e., 10 years) of “covered work” (i.e., income on which FICA tax is charged) are eligible for benefits and can apply as early as age 62. After age 70, there is no additional benefit increase for postponing filing any longer.
Like all workers, older adults who continue working pay FICA tax and may see their benefits increase if their earnings in later life are larger than what they earned in their teens and 20s. Benefits are based on a worker’s highest 35 years of career earnings.
Health Care Transitions
Health care transitions in later life are a virtual certainty. Among them are the increasing cost of health care as people get older, the experience of buying health insurance as an individual for the first time (if it has been an employee benefit for your entire career), and about 2,500 hours of freed up time (50 hours per week x 50 weeks of work) to take care of your body (nutritious meals, exercise, sleep) to stave off chronic diseases (e.g., diabetes) and maintain a good quality of life.
Transitioning to Medicare
Virtually every older adult transitions to Medicare for health care coverage at age 65. This prompts numerous decisions such as Original Medicare vs. Medicare Advantage and the selection of a supplemental Medigap policy if Original Medicare is selected. Another issue for higher earners is trying to sidestep higher Part B and Part D premiums due to the Income-Related Monthly Adjustment Amount (IRMAA). A good source of Medicare assistance nationwide is SHIP.
Setting New Financial Goals
A frequently cited long-term financial goal is saving enough money to retire and live comfortably on accumulated savings and earned benefits. This is a “To Retirement” goal because it involves saving for a future workforce exit. The next phase of goal-setting is a “Through Retirement” goals: things you want to do or buy during the remainder of your life; i.e. a bucket list. The best way to make later life goals a reality is to use a planning tool to develop specific action steps.
Financial Organization and Simplification
Once job constraints disappear, older adults have time to take financial organization and simplification off the proverbial backburner. Remember, if you don’t do this work, someone else (e.g., an adult child or attorney) will eventually have to.
Among tasks to consider are: consolidating “like” assets (e.g., multiple IRAs), creating a financial inventory and digital assets inventory, reviewing beneficiary designations, selling, donating, or gifting unneeded possessions, and culling automated payments (e.g., gym and satellite radio).
Increased Interest in Philanthropy
As people get older, the phrase “You can’t take it with you” becomes more meaningful. This is especially true for “ants” who realize they will likely never run out of money during their lifetime. Two solutions: spend more on “stuff” and/or experiences or make gifts while you are alive and/or following death. Several philanthropic actions can also reduce a donor’s income taxes including qualified charitable distributions, donor advised funds, and gifting appreciated securities.
Becoming “Fraud Bait”
The famous bank robber, Willie Sutton, was reportedly asked why he robbed banks and replied, “Because that’s where the money is.” For this same reason, older adults are frequent targets for fraud. Among the most common scams are tech support scams, imposter scams (e.g., fraudsters purporting to be from Medicare, Social Security or the IRS), and romance scams.
Good rules to follow are: use caution with free meal seminars, recognize red flag language (e.g., high guaranteed returns and “you must act now”), and never sign forms with blank spaces.
Achieving Financial Peace of Mind
The ultimate financial transition is achieving financial peace of mind, which can be defined as knowing you will be okay for the rest of your life and that your “affairs are in order” after you pass.
Suggested strategies include: periodic status checks with a Monte Carlo calculator, adjusting expenses as needed, developing a long-term care plan, keeping estate planning documents updated, and savoring financial independence if your retirement savings is more than adequate.
Later life is a decades-long adjustment period that includes personal finance transitions. It is a time to arrange memorable experiences, consider philanthropic gifts, simplify record-keeping and possessions, and explore long-term care options and older adult housing facilities. Accept that there will be a lot that you cannot predict, control what you can, and adapt as necessary.
