financial tips for seniorsFinancial Tips for Seniors

Written by Eddy Hood

Every adult has to attend to financial matters, but seniors have special considerations to keep in mind. When retirement is approaching, priorities tend to shift. This usually means a change in both spending and saving activities. To ensure that you have adequately planned for your future, assess your finances and money management as you approach your senior years. The better you plan, the more enjoyable your retirement and golden years can be. It may also be helpful to get professional accounting and tax advice, especially if you have a business or other important assets to deal with.

Set Goals

Defining your goals is a crucial step in managing your current and future finances. Whether you've already attained the level of living you desire or you're still trying to achieve these goals, you need to outline them, including professional and personal milestones. Seniors will also want to consider how they want to handle the advancing years, which might include some type of physical assistance when daily tasks become difficult. When health challenges arise, do you prefer to stay in your home as long as possible, or are you willing to get assistance in some type of care facility? The answer to this question will help determine how much money you will need to manage these expenses.

Retirement Income

Seniors may have income coming in from a variety of sources during retirement. Investment income from retirement or savings plans is often a big part of a senior's income. It's also wise to continue some low- to moderate-risk investments during the senior years to keep growing your money. Social Security is another benefit that will provide some income. American taxpayers pay Social Security tax and earn credits during their working years, and the age of retirement and amount of earnings impacts the number of credits earned, which in turn impacts benefit payments. Those who are disabled can also receive disability benefits via Social Security. It may also be possible for family members to receive Social Security benefits, too, if they meet the eligibility criteria. Survivor benefits could also be paid out to a spouse or dependents upon the death of a senior receiving Social Security benefits, if eligibility criteria are met. Social Security also pays out a one-time death benefit to a surviving spouse or child.

How to Plan

Planning for your senior years involves both short- and long-term strategy. At the outset, it's prudent to determine your potential lifespan so you can make a plan to make your money last as long as you live. Lifestyle planning goes hand in hand with this because your daily lifestyle and activities will have a direct impact on how long your money lasts. It's also important to set aside some money in an emergency fund so you're able to pay for unexpected expenses if they arise. Consider potential tax liabilities you may be responsible for as you plan your retirement income, too.

Health Care Planning

Planning for health care and long-term care during the senior years is a major financial factor. Medicare and Medicaid can help with some health-care expenses, but these plans won't typically cover all of these costs: Many seniors need supplemental medical insurance as well. Long-term care may involve in-home care, assisted living, or nursing home care. Many seniors add long-term care insurance to their suite of coverage.

End-of-Life Planning

Planning for the end of life is rarely pleasant, but it's an important step to ensure that your survivors are cared for after your death. Life insurance is one way to provide for a spouse and dependents. Creating a will to distribute your assets and personal property is also a good idea because it will help prevent confusion or conflicts after your death. If you have a health condition that's likely to affect your ability to take care of your own finances as you age, you may also want to consider the possibility of giving someone power of attorney so that they can step in to manage your affairs.

Setting a Budget and Managing Cash Flow

A spending plan will help you live on a fixed income. You might use software to create your budget, or you can use a basic accounting ledger on paper. To develop your spending plan, identify all sources of income, including government benefits, pensions, investments, and possible part-time employment. Then, identify both fixed and flexible monthly expenses. Reconcile income and expenses to make sure you have enough money to cover the necessities, hopefully with some money left over for discretionary spending such as traveling, gifts, and entertainment. If your income is inadequate to cover your expenses, either find ways to increase your income or decrease your expenses.

Avoiding Scams and Abuse

Criminals often target seniors, so staying vigilant to avoid financial scams is important. Scammers may try to get seniors to donate money or to share personal information, possibly by offering a bogus prize, by pretending to be a family member who needs money, or by selling fake prescription medicines. Seniors should be skeptical of any offer that comes in by email or phone. Avoid making purchases or giving information to people who approach you without you initiating the exchange.