Financial matters affect the lives of all Americans. But, as a senior, finances may play an especially large role in your well-being. After all, at this stage of life, priorities often change. And new realities may influence your spending and saving habits. That’s why it’s a good idea to take a step back and make sure you’re on a financial path that truly serves your interests. By managing your money well, you’ll have an easier time achieving the lifestyle—and other goals—you want.
And isn’t that the whole point? The more you know about your financial affairs and the options available to you, the brighter your senior years are likely to be. You get to make your money work for you. That’s true whether you’re currently retired, planning to retire, or working by choice or out of necessity.
But, of course, it’s important to remember that sustaining healthy finances as a senior or elderly individual often requires taking some special factors into consideration. For example, your goals for the immediate and more distant future are probably very different from what they were a few decades ago. You also may have close relatives who want to help you, who need financial assistance of their own, or who may inherit your assets. Plus, you can’t ignore your health care needs or the fact that protecting your money becomes increasingly important as you age.
It may seem like a lot to think about. But you can do this. Here are some things to consider:
- Your various goals
- Short- and long-term planning
- Budgeting and managing your cash flow
- Getting help
- Avoiding scams and elder abuse
Table of Contents
Setting Your Goals
Are you happy with your current lifestyle and overall situation? Do you hope for something better? Either way, narrowing down your goals is important. After all, you can’t get where you want to go if you aren’t even sure about where that is. So take the time to really hone in on what your future wants and needs may be.
Consider all aspects of your life—from your health to your living arrangements to your relationships. What do you hope to accomplish? What do you hope to sustain or improve upon? What do you hope to leave behind for your heirs? Be honest. Be realistic. And be specific. Remember to consider fun things like your hobbies, leisure activities, and potential travel.
Also, keep in mind that, as you age, you may need elderly care or assistance with certain aspects of everyday living. Do your goals reflect that possibility and take into account how you’d like to be cared for in the event that you experience health challenges?
Map out a vision of what you want for the rest of your life. Doing so can help you avoid some of the pitfalls that other seniors experience. (For example, did you know that about one-third of Americans over the age of 60 are considered economically insecure?1) By re-establishing your goals (and reviewing them on a frequent basis), you’ll create a more solid foundation from which to build greater financial security and life satisfaction.
Short- & Long-Term Planning
Here’s where some of your goals may start coming into sharper focus. As you take your current situation into account and start thinking about future possibilities, it may become apparent that you need to engage in more thoughtful and detailed planning. Establishing smart strategies—based on your goals and special circumstances—is vital for good money management. Otherwise, you risk greatly underestimating how much money you’ll actually need going forward. Consider important aspects such as:
- Your potential life span—Is it possible that you might outlive your money? Many people underestimate how long they’ll live. As a result, they draw down their savings too quickly and end up with unexpected changes to their lifestyles. You might live longer than you think. Are you prepared for that?
- Emergency savings—Do you put any money away for a rainy day? Unfortunate events can occur without warning. But if you have an emergency fund, then you’ll have a better chance of getting through hard times without taking a big financial hit.
- Lifestyle planning—America’s seniors have a growing number of living options when it comes to their residences and activities. But different options have different costs associated with them. So it’s important to have a realistic idea of what you can afford—both now and in the future.
- Taxes and investments—A lot of seniors depend on income from investments such as 401(k) plans, individual retirement accounts (IRAs), or other savings plans. And they often want to keep growing their money through low- or moderate-risk investments. But taxes can have a big impact on how much money from investments or benefits you actually get to keep—and how long you may be able to rely on those funds. So it’s vital to figure out the most tax-efficient ways to withdraw and accumulate your savings.
- Health care—For many seniors, health care costs represent the biggest financial challenge. That’s because Medicare and Medicaid, by themselves, frequently don’t cover all health-related expenses. As a result, a lot of seniors and elderly Americans end up having to pay for supplemental medical insurance and/or cover the extra costs out of pocket. And that leaves many of them unable to afford necessary treatments or put in the position of having to choose between food, home heating, and health care. So this issue requires a lot of attention and forethought. After all, over 84 percent of seniors over the age of 65 have at least one chronic health condition. And chronic diseases account for about 95 percent of all health care expenses for America’s seniors and elderly people. 1
- Long-term care—This issue is closely related to the previous one. Many seniors underestimate the costs of their health care as they age. They simply don’t anticipate needing a lot of care during their later years, especially if they’ve been living a healthy lifestyle. But anybody can be struck with a debilitating illness or disability. If it happens to you or a loved one, you may need to pay for in-home care, assisted living, or even nursing home care. So it’s a good idea to look into long-term care insurance in order to provide for that possibility and give yourself some options. (Medicare and Medicaid are both limited in what they cover, and it can sometimes be difficult to meet their eligibility requirements for out-of-hospital care.)
- Life insurance—Do you have a spouse, special-needs child, or any other dependents who rely on your income or financial support? If so, are they protected in the event that you pass away before them? True, this isn’t a pleasant subject to think about, but it is an essential one. Life insurance is a critical component in the financial plans of some older Americans.
- Estate and end-of-life planning—Do you have a legal will that describes how your assets and personal property should be divided when you pass away? Having one can give you peace of mind now and prevent family conflicts and confusion later on. It’s also wise to have a living will that describes how you would like challenging health care decisions to be made in the event that you become unable to communicate your wishes. As part of that, you may want somebody you trust to have certain powers of attorney over your financial affairs.
Budgeting & Cash Flow Management
Creating a comprehensive spending plan is one of the most important actions you can take, especially if you’re retired and living on a fixed income. Without a realistic budget that’s based on your unique situation, it becomes all too easy to get into financial trouble. Every dollar counts. So take the following aspects into consideration as you develop your budget:
- Your income—Identify every source of incoming money that you can reliably count on. Are you receiving Social Security benefits? Do you have any income from a pension? What about income from investments such as a 401(k) plan, IRA, certificates of deposit, stocks, bonds, or mutual funds? Do you have a job, or are you able to get one? Make sure you have a full and accurate picture of how much money is currently coming in as well as how you might be able to generate additional income if you need to.
- Your fixed monthly expenses—Figure out what you have to pay for on a regular basis that you can count on to be the same amount each month. For example, you probably have to make mortgage or rent payments. You also may have to pay monthly health insurance premiums or make regular payments on a car loan or other kinds of debt obligations. And don’t forget about your savings. See if you can pay yourself a fixed amount each month. Look into setting up automatic bill payments and savings transfers to make managing this part of your budget easier.
- Your flexible monthly expenses—Think about all of the things you pay for on a regular basis that don’t always cost the same amount. Examples include food and groceries, gas, and utility bills. Depending on your situation, your phone bill and prescription drugs may also fall into this category. As you plan your budget, try to build in some wiggle room for times when these expenses might be higher than you expect.
- Your periodic expenses—Do you have any important expenses that only come up once or a few times a year? For instance, do you have to pay property taxes or renew your home or car insurance? What about home maintenance? Does your home require periodic repairs or seasonal upkeep that you hire other people to perform?
- Your discretionary expenses—These include things like entertainment, new clothes, charitable donations, and gifts for friends and relatives. Try to think ahead and plan for what you’ll want to spend. That way, you’ll have a better chance of being able to pay cash instead of acquiring debt.
Remember: The goal is to have your income cover all of your expenses. If your total expenses outweigh your income, then you’ll need to find ways to either increase your income or reduce your expenses. The alternative is going deeper into debt, which is a recipe for trouble—especially when you’re a senior on a fixed income.
Thankfully, seniors and elderly Americans often have more ways to reduce their expenses than younger people do. For example, many restaurants, retailers, fitness centers, and entertainment venues offer senior discounts. In addition, free cell phone plans are available in some states for seniors above a certain age. And some towns and cities offer programs for seniors that can help them legally reduce their property taxes.
During your senior or elderly years, managing your finances can feel a little daunting. That’s true even if you’re lucky enough to escape some of the cognitive decline that is a normal part of aging. So, sometimes, the best thing you can do is ask for help. It’s nothing that you have to feel embarrassed about. But it is vital that you identify people you can trust. Options to consider include:
- Trusted relatives—Many adult children of elderly parents choose to help their loved ones manage their financial affairs. In some cases, they may only do things like pay bills, make bank deposits, maintain records, negotiate with creditors, or assist with filing taxes. In other cases, they may take on larger roles—all the way up to having financial power of attorney or guardianship over some or all aspects of their parents’ finances.
- Licensed financial professionals—With a trusted accountant and/or financial advisor on your side, you can put together a customized plan that helps you accomplish your goals. Licensed financial professionals can help you understand and sort through your options. They can also help you prepare a balanced budget and provide educated advice about financial strategies that may work well in your unique situation. Look for professionals who hold the required licenses for their fields and who are registered with oversight organizations such as the Financial Industry Regulatory Authority (FINRA).
- Government programs and elder-assistance agencies—Many public and non-profit organizations offer daily money management (DMM) programs for seniors and elderly individuals. They can provide assistants to help you manage certain parts of your finances such as paying bills, preparing checks to sign, preparing a budget, maintaining your financial records, and negotiating with creditors. In addition, many government programs exist to help seniors reduce their expenses or grow their income or savings. For example, you may be able to apply for benefits through programs like the Supplemental Nutrition Assistance Program (SNAP) or the Senior Community Service Employment Program (SCSEP). Programs may also be available to help you lower your prescription drug costs and utility bills.
Avoiding Scams & Elder Abuse
Unfortunately, financial scammers often perceive older adults and elderly Americans as easy targets. So it’s critical to stay vigilant. Even if you don’t have a lot of money in the bank, fraudsters still might target you and try to steal your personal information or whatever money you do have.
Financial criminals often prey on seniors because they know that many older adults experience a decline in their cognitive abilities. In addition, some seniors are extra-vulnerable to fraud because of mental illness or physical or social isolation. Frequently, they are also reluctant to report financial crimes to the police because they feel embarrassed about having been swindled.
Scammers use all kinds of different strategies to fool seniors into giving them money or valuable personal information. For example, some of the most commonly used strategies include:
- Pretending to be a grandchild (online or over the phone) who urgently needs money
- Offering bogus prizes or deals as part of a fraudulent telemarketing scheme
- Using fake emails or online pop-up windows to con people into providing personal financial information
- Creating pyramid investment schemes or overly complex financial products to swindle people
- Selling counterfeit prescription drugs or bogus “anti-aging” products
- Posing as a Medicare or Social Security representative
- Pretending to be someone from a utility company
Those strategies are just the tip of the iceberg. So stay aware of the risk, and always remain skeptical. It’s wise to never buy anything from—or give information to—people who call you, email you, or show up at your door unexpectedly.
What if you’re worried that an elderly parent or other loved one is being victimized in this way? Watch out for warning signs such as:
- Stacks of sweepstakes mailings or unopened bills
- Over-hyping an investment’s benefits without much attention to its risks
- Cognitive difficulties, such as with simple math
- Appearing afraid, confused, or disheveled (if that isn’t normal for him or her)
- Sudden or out-of-the-ordinary changes in bank accounts
Of course, it’s also important to recognize that some seniors are financially victimized by their own relatives or caregivers. In fact, family members commit more than 90 percent of all elder abuse that gets reported.1 Most commonly, it is the adult children of elderly parents who commit financial abuse. However, some elderly Americans are also vulnerable to fraud by other family members such as their grandchildren, nephews, nieces, cousins, and so on.
Don’t let anyone take advantage of your trust.
You deserve to have your finances work toward your own best interests.