Age 65 is the magic number for many working people. It’s the age when many decide to leave the workforce and retire. Some may reduce their work schedules to part-time, and others may choose to continue working full-time.
Whether you work full-time, part-time, or don’t work at all after age 65, your finances will always be a concern. You want to ensure you have enough money to see you through the rest of your life.
How do you know if your finances are in good shape after age 65? There isn’t a single formula, but there are signs to look out for that indicate whether you're in good financial shape or need to make some changes.
1. No Mortgage
If you own your home free and clear – with no mortgages or home equity lines of credit – you’re one of the fortunate ones. According to a 2022 report from the Survey of Consumer Finance, 30.1 percent of homeowners aged 75 and older had home mortgages.
38% of homeowners between the ages of 65 to 74 reported having mortgages on their homes during the same period. Owning your home outright frees up a substantial amount of money. It’s also a highly valued asset.
2. Emergency Savings
An emergency savings account is a lifesaver for covering unexpected expenses. You need to have an emergency fund, mainly if your income isn’t as high as your working wages.
If you have at least six times your monthly expenses in an emergency fund, you’re in a good place. If you have less or nothing at all saved up, it’s not too late to start.
3. You Maxed Out Your 401(k)
If you maxed out your 401(k) contributions to earn the employer match throughout your career, by the time you reach age 65, you’ll have a healthy amount saved for your retirement.
Even if you didn’t max out your 401(k) plan and you’re still working, it’s not too late. Check with a financial advisor to see what options you have.
4. You Live Within Your Means
Having a monthly budget and not exceeding it is an excellent sign that you’re disciplined and have your finances under control. Kudos to you!
It’s tempting to splurge on items you want but don’t necessarily need. But if you resist the urge and stay true to your budget, you’ll thank yourself at the end of the month.
5. Good Credit
Having a good credit rating is important for taking out secured and unsecured loans and opening revolving credit accounts. The higher your score, the more likely you are to obtain credit.
Credit scores from 670 to 739 are good, 740 to 799 are very good, and 800 and up are excellent. If your score is below 670, there are options available to help rebuild your credit.
6. You Have a Low Debt-to-Income Ratio
A debt-to-income ratio is a number lenders use to determine how much of a risk you are before extending credit. A high debt-to-income ratio means there are many debt obligations compared to your income.
A low debt-to-income ratio means you have few outstanding debts compared to your income. It’s important to continue keeping this ratio as low as possible.
7. No Credit Card Debt
Having no credit card debt doesn’t mean you don’t have credit cards. It means you either don’t use them or you pay the balances off in full each month.
Staying out of credit card debt keeps more money in your pocket. You’re not making minimum payments or paying accumulated interest, lowering your debt-to-income ratio.
8. You Can Afford to Travel
Leisure travel is a luxury many wish to enjoy in their golden years. Those who have carefully managed their finances can afford to travel while staying within their monthly budget.
Saving money in a vacation fund is one way to fund your travels. Another is to use a credit card with travel mileage and rewards, remembering to pay the balance in full before the due date.
9. Sufficient Retirement Savings
Various formulas and percentages are used to determine how much money you need to retire comfortably. The amount depends on individual financial needs.
AARP recommends having 80% of your working income saved towards retirement. If you’ve managed to save that much, you’ve done an excellent job saving toward your future.
10. You Don’t Rely on Social Security
For many, Social Security benefits are their primary source of income rather than a 401(k), IRA, or other savings account. This isn’t a bad thing, but it’s not great, either.
Can you support yourself comfortably before counting your Social Security benefits in your monthly budget? If the answer is yes, you’re doing quite well for yourself.
11. Long-Term Care Insurance
Long-term care insurance is something that’s usually overlooked until it’s needed. By then it’s probably too late to get approved for coverage due to age or poor health.
Buying a long-term care policy before age 65 increases the likelihood of getting approved, provided you're in good health, and lowers your premiums.
12. You’re An Empty Nester
Having children living at home can cost you more money, especially if they’re in college and have expenses you must pay. The cost is even greater with more than one kid in college.
Empty nesters are in a better position to set aside money for their short—and long-term goals, and the extra money can be substantial.
13. Relatively Good Health
If you’re in reasonably good health, it’s critical to put in the work to keep yourself in good mental and physical shape. The healthier you are, the less money you’ll spend on healthcare treatment costs.
Staying active, eating a balanced diet, and having routine checkups help maintain one's well-being. Enjoying good health is the key to living well when one is over age 65.
14. You’ve Already Retired
Everyone wants to reach the stage in life when they no longer have to work and can maintain their lifestyle. If you’re over 65 and are already there, congratulations!
That means you’ve done such a good job at managing your finances that you don’t need a job to live comfortably. Enjoy your well-earned retirement.
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