5 Things You Need to Know Before Retiring at 62

Here’s how to get your financial house in order

Forget cleaning out the closet, scrubbing the floors and washing the windows. The start of spring is an even better time to get your finances in order.

“One thing on many people’s minds is cleaning. But what if you put that cleaning energy to your financial house?” says consumer savings expert Andrea Woroch.  “Considering consumer credit card debt has reached a new record high of $1.13 trillion, it’s a good time to focus on refreshing your spending and saving habits.“ That’s particularly true of people nearing or entering retirement. Half of retirees live on less than 50 percent of their preretirement income, according to research from Goldman Sachs Asset Management. And 40 percent of older adults rely on Social Security alone, which averages $1,657 a month, the National Council on Aging reports.

Whether you’re on a fixed income, have cash in the bank or are still working, a financial spring cleaning can help you save money, reset your priorities and get you closer to your short- and long-term goals.

1. Spruce up your budget

Taxes are due, vacation planning is underway and the end of the year is in your sights. That makes springtime a great season to give your budget an overhaul.

“First and foremost, it’s a good time of year to take a fresh look at your budget and see how you’ve been doing during the first quarter,” says Emily Irwin, head of advice relations at Wells Fargo Bank. “Do you need to make any adjustments based on the economy?”  Assessing your budget means taking a realistic and detailed look at your spending patterns and identifying areas to cut expenses.

If you need help creating a budget, there are free resources available to older adults, including AARP’s Money Map digital tool which helps you create a budget; The National Foundation for Credit Counseling, which offers free access to NFCC Certified Counselors; and the Federal Trade Commission’s website, which has a budget sheet as well as free educational material covering different money matters.

2. Tackle your debt

The days of being flush with cash during the pandemic are long over. Thanks in part to inflation, many consumers rely on credit cards to cover spending shortfalls. That’s true of the nearly 3 in 4 Americans 50 and over who carry some form of debt, according to AARP’s Debt Survey. It also found 61 percent of the close to 7,400 surveyed who carry debt feel that their level of debt is a problem, including 16 percent who say it is a major problem.

To get out of a hole, experts say to throw any windfalls, such as a tax refund, to the debt. Also, try to pay more than the minimum whenever possible. Money experts say to tackle the highest interest rate debt first, but if you need a quick psychological win, paying off the one with a smaller balance may be the better option. “Know yourself a little bit to keep the path moving forward,” says Irwin.

If you can’t throw extra money at your credit debt, try negotiating your interest rate with the credit card provider. All it takes is a phone call, says Woroch. A recent Lending Tree study found that among credit cardholders who requested a lower interest rate, 76 percent got it.

Another option is to move your current debt to a card that offers a zero percent balance transfer. The longer the payback the better. Make sure you aren’t getting hit with a lot of fees that won’t make it worthwhile.

3. Tweak your taxes

If you were hit with a big tax bill or received a paltry refund this tax season, it may be a good time to check your tax status, says Irwin. You want to fix it now so you aren’t in for any shocks next year.

“Did you withhold too much?,” says Irwin. “If so, adjust it…. Did you withhold less  and now you are in a position where you owe money?”

If you want to adjust your W-4 filing status, you can complete this form and submit it to your employer. If you want to change the withholding from a pension, annuity or IRA, use this form.

If you need help with your taxes, AARP Foundation’s Tax-Aide program provides free advice to over 78 million taxpayers, with a focus on older adults with low to moderate income.

4. Check for hidden fees

From account maintenance to overdraft protection bank fees can add up. To ensure you aren’t on the hook for unexpected expenses, do a deep dive of your accounts. Look at the monthly and annual fees, the annual percentage rate and any other costs the financial institution may tack on.  If you spot any hidden fees, ask your bank to waive them or see if they offer a no-fee checking account. If not, Woroch suggests shopping around for a better deal.  “There are a variety of no-fee debit cards that provide free overdraft protection and free withdrawals,” says Woroch. Moving your savings also makes sense if you can get a better rate at a different financial institution, she says. The average annual percentage yield was 4.5 percent or more in March. Don’t forget to review your investment accounts. Fees are listed in quarterly statements. Irwin says it’s up to you to understand how they are being charged. If you are uncertain, speak up. Make sure you are getting what you pay for, she says.

5. Flush your points

Now is the time to take stock and see if you have accumulated credit card reward points that have gone unused.

You never know – it may be enough to pay for a trip. Even if you aren’t traveling, those points can be redeemed for cash, a statement balance, a gift card or a host of other rewards.  “This time of year I’m looking at my credit card points and my hotel points and thinking about what travel I’m going to do next year and how I can use these points to decrease out-of-pocket costs,” says Irwin.

6. Scrub your spending

If you are a shopper who can’t resist a sale, there are ways to scrub your bad spending habits and save. Out of sight out of mind is one, especially if you are prone to overspending online. Unsubscribe to your favorite store newsletters, delete retailer apps and avoid malls where you may be tempted to drop in on a favorite store, Woroch says. When it comes to the everyday items you have to buy, Woroch says to shop savvy: look for deals, use coupons, take advantage of cash-back tools and consider purchasing used items when it makes sense..

7. Trash your old paperwork

Take the time to get rid of old documents. It’s an easy way to get organized and prepare for a fresh start. But take care to hold on to real estate records for as long as you own your property and keep most tax records for up to three years from filing, Woroch says. When you do dispose of financial records, make sure to shred bank and credit card statements and anything with identifying information such as your Social Security number. Identity theft and financial fraud impacts millions of older adults per year and some of it stems from what fraudsters find in the mailbox and garbage. To put it in perspective, in 2022 412 US letter carriers were robbed and there were 38,500 reports of incidents involving mailboxes and mail theft.  “Anything that has your Social Security number, your date of birth or account number should be shredded,” says Irwin.  “Shredding is super necessary to protect from fraud and ID theft.”