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Question: “At 63 years old, I am concerned over my retirement income. I retired at 60, with a passive income of about $45,000 per year, and started receiving $1,500 per month in Social Security at 62. My income is from rental properties with long-term leases that should extend through my 70s. I managed to put about $200,000 into an IRA. My mortgage is about $450 a month, plus taxes and insurance, with 10 years remaining. What options do I have to increase my portfolio and ensure my financial security for the next 15 years?”
Answer: You have a lot to consider here — and you may want to have a financial adviser help you make a plan to help your money grow and last throughout retirement, pros say. But before we go into whether to get a financial planner or not, let’s look at your situation and see what risks you might be facing that you should think about.
Some of your biggest risks are general inflation, renter risk — the potential for a tenant to have a negative impact — and long-term care costs, says Mark Struthers, a certified financial planner and founder of Sona Wealth Advisors.
Inflation risk: To outpace inflation, you’ll want to be sure your money is hard at work. Look at how that IRA is invested and whether that aligns with your long-term goals, suggests Ryan Haiss, a certified financial planner and co-founder of Flynn Zito Capital Management. “I often see DIY investors overexposed to certain sectors, such as technology, or taking on more risk than they realize,” Haiss says. “While that may work well in strong markets, it can be detrimental during downturns. An adviser can help review your investment strategy to ensure it aligns with your long-term goals.”
Even though you are 63, that doesn’t mean you should plunk all your money into a savings account. “Generally, you need to be in a diversified portfolio of stocks and bonds and not just sitting in cash,” says Lauren Lindsay, a CFP at Beacon Financial Planning. This guide can help you get guidance on how to invest in your 60s.
Boosting retirement income: Since you’re concerned about your retirement income, it’s worth looking into ways you can reduce your monthly costs. You don’t mention your overall monthly spend, but cutting back on things like eating out, entertainment or travel can have a significant impact on your bottom line. Because you’re already retired, increasing your income is tricky, but you may be able to find a part-time job that won’t disrupt your Social Security.
Another question you may be asking is: Should you repay your mortgage to free up more money? Probably not, unless your mortgage interest rate is really high. “The question worth asking is what rate of interest you pay on your mortgage,” says Kashif Ahmed, CFP and founder and president of American Private Wealth.
Rental property risk: Your real estate is also something you must consider. “Your long-term leases can give you some comfort that you will have an income stream, but it could also mean that your costs to maintain the property could go up faster than you can raise rent,” says Struthers. While there’s no one-size-fits-all maintenance budget for rentals, adopting the 50% rule can be useful in determining how much money to set aside for potential maintenance or repairs. Basically, you’d set aside half of the annual rent to cover operating expenses or emergency issues that may arise.
Alonso Rodriguez Segarra, CFP and founder and CEO at Advise Financial, says you may want to work with a financial planner who “can help you carry out some scenarios that allow you to analyze if it makes sense to sell one of the properties over time.” They’d do this “by calculating the ratio of net return that you are obtaining for the rent versus the amount of money you have invested and check if you can earn more with another type of investment in the future,” he adds.
Long-term care costs: It’s also worth considering how long-term care costs might impact you. According to the Fidelity Retiree Health Care Cost Estimate from March 2024, a single person age 65 in 2023 may need about $157,500 saved after tax to cover health care expenses in retirement — which equates to about $315,000 for a couple. That said, there are different ways to fund this care, from self-funding to acquiring long-term care insurance, incorporating a hybrid of life insurance and LTC, or relying on government programs. This guide can help you explore your options.
In general, seeking out a professional’s help can be especially important the older you get. “Ultimately, as with almost any situation where there’s a decision of whether to hire a professional or not, it comes down to your own comfort level that you have the expertise it takes to handle those issues yourself, and the inclination to take the time to do so,” says Michael Kitces, chief financial planning expert at financial planning site Nerd’s Eye View.
Adds Struthers: Even if you’re a pretty financially savvy, “having a second opinion can give you more confidence — and you also don’t know what you don’t know.”
When taking the adviser route, look for a fiduciary. “They can’t take commissions [which are] most often from insurance product,” Struthers says. “This can help ensure that bad incentives do not taint the advice. An insurance product might be a good fit for your situation but you want your adviser to be paid the same whether or not they recommend it.”
You may want to considering a CFP, as they undergo extensive education requirements, pass exams, perform thousands of hours of work-related experience and are required to uphold a fiduciary duty. “They can help you structure and perhaps manage the investment portfolio that will lead you to your financial security for the next 15 years. They can also review tax-planning opportunities to analyze if you should do some Roth conversions before your RMDs begin,” says Segarra, who adds that some of them can also analyze your real estate portfolio and give direction there.
DIY-ing your finances is also an option, but you’ll want to thoroughly evaluate what it would look like to do this before deciding to move forward. (Here are several types of people who do not need a financial planner.) You can also hire a pro to help you create a financial plan and then take the DIY route from there once you’re armed with a roadmap. A one-time plan that will likely cost between $1,500 and $7,500 depending on where you’re located and the complexity of your finances, pros say.
Questions edited for brevity and clarity. By emailing your questions to The Advicer, you agree to have them published anonymously on MarketWatch; they may appear anonymously in other media and platforms.
