How much money should you have in your brokerage account at age 60?
When you reach the age of 60, your eyes will likely be on retirement. Many people aim to leave the workforce at some point in their 60s, especially since it is possible to start collecting Social Security at 62 and Medicare eligibility begins to drop. 65 years.
But if you want to retire with enough money to comfortably cover your living expenses, then you will need to save for that period of life accordingly. Fidelity Investments recommends that workers save enough money before the age of 67 to replace 10 times the amount of their final salary. And Fidelity also says that at age 60, you should have eight times your salary in reserve for the future.
Now you can have money hidden in different accounts. Many people have access to a 401 (k) plan through their work, and those who don’t often open an IRA or an individual retirement account instead.
401 (k) and IRAs are specifically for retirement and as such come with certain rules. For example, if you make a withdrawal from either of your accounts before you are 59 1/2, you usually incur a costly penalty. On the flip side, 401 (k) and IRAs offer tax breaks to keep your money in a smaller account.
Brokerage accounts, on the other hand, do not impose similar restrictions. You can access the money in your brokerage account anytime and for any reason. The only thing is that brokerage accounts do not offer any tax benefit.
If you are already 60, you may be wondering how much money you should have in your brokerage account. Here’s how to figure it out.
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Prepare for financial security
If we follow Fidelity’s advice, the amount of money you should have in a brokerage account at age 60 can be calculated by multiplying your salary by eight, then subtracting your pension plan balance. So let’s say you earn $ 100,000 and you have $ 650,000 in a pension plan. Since you would want a total of $ 800,000, your brokerage account balance should ideally be $ 150,000 ($ 800,000 – $ 650,000 = $ 150,000).
If you think you don’t have enough money in your brokerage account, you can always try to cut back on your spending to free up more money to inject. But remember, once you’re 60, you’re allowed to access your 401 (k) or IRA money without having to worry about penalties. So if you have extra money to invest, it is generally beneficial to maximize your pension plan contributions before putting more money in your brokerage account, as IRAs and 401 (k) provide relief. tax, unlike brokerage accounts.
The amount of money you can invest in a retirement plan changes from year to year. This year, if you’re 60, you can contribute up to $ 26,000 to a 401 (k) and up to $ 7,000 to an IRA. Keep in mind that workers under the age of 50 have lower contribution limits.
How to invest your brokerage account at age 60
If you are a few years away from retirement, you will need to be very careful about how you invest your money. While loading stocks is a good idea when retirement is a decade or more away, once that point draws near, it’s generally wise to move some (but not all) of your investments from stocks to bonds. (Their value tends to fluctuate less drastically.)
The logic here is that you may need to cash out your short-term investments to pay for your living expenses once you stop working. So if you keep too much money in stocks, you may find yourself in a situation where you have to liquidate them at a time when their value has fallen. Since bond values ââtend to be more stable, you don’t risk the same type of losses.
That doesn’t mean, however, that you shouldn’t have stocks in your brokerage account at age 60. Take a look at how your retirement plan is invested. It is not a bad idea to divide your total assets (those in your pension plan and your brokerage account) so that 50% is in bonds and the remaining 50% is in stocks. If your IRA or 401 (k) is more heavily invested in bonds, you may be able to keep more of your stock brokerage account.
It is a good idea to have a good amount of money in your brokerage account before the age of 60. But remember, it’s important to get the big picture. If you have a lot of savings in an IRA or 401 (k), you might not need that many savings in your brokerage account, so keep that in mind before you worry about not having spent enough.
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