ANTHONY T. NEWMAN, PRESIDENT
Retirement marks an important life transition – and a big financial milestone. As a result, seniors have unique financial planning needs. The goal is to maximize your savings so you can live well today and leave a legacy that’s aligned with your values. In that spirit, here are seven helpful financial planning tips for seniors.
Update Your Financial Goals: Your financial goals_will probably look different when you’re no longer working. During this phase of your life, you may want to travel, downsize, relocate to a different state, explore new hobbies and/or provide financial support to your children or grandchildren.
The first step is to clarify your financial goals and estimate how much each one will cost. You should make a plan for drawing on your nest egg in the most efficient way possible.
Clarify Your Costs: Most seniors are on a fixed income, that’s why it’s important to know your expenses. There are essential costs that include your rent or mortgage, insurances, taxes, utilities, gas and debt. Then there is discretionary spending. These are extras like eating out, shopping, golfing, traveling and other nonessential costs. Keep in mind that the expenses may increase in retirement, such as housing, and medical costs (more on this below).
Plan for Health Care Expenses: According to Fidelity Investments, the average 65-year-old retired couple could need roughly $315,000 for health care costs in retirement. Medicare, available for folks who are 65 and older, doesn’t cover everything. Seniors are still on the hook for premiums, deductibles, copays and other out-of-pocket costs. Your expenses will likely be higher if you retire before you’re eligible for Medicare. Long-term care, if needed could also amount to a big expense or loss of assets.
Manage Your Budget: Budgeting_is always important, especially if you’re on a fixed income. List all your income sources like: 40l(k)’s, Social Security, IRA’s, 403(b)’s, annuities, pensions, cash and stock dividends. You’ll want to be strategic about how you draw on your savings, as it could create a significant tax bill. In terms of day-to-day spending, you can look for senior discounts on car insurance, travel, groceries, restaurants, trips to the movies and more.
Don’t Forget About Taxes: If you pull money from a tax-deferred retirement account, like a 40l(k), 403(b) or traditional IRA, it’s considered taxable income – and taking large distributions could trigger a substantial tax liability and could even push you into a higher tax_bracket.
Withdrawing from the right investments can help you keep more of your hardearned money. That might mean combining funds from a few accounts. Keep in mind that you’ll need to start taking required minimal distributions (RMD’s) beginning at age 73. So yow· income plan will need to be modified. Work with an advisor who does more than invest money. Find one who helps you create a tax-free plan.
Update Your Estate Plan: Estate planning involves organizing your assets and making a plan for how you’ll distribute them after you’re gone. Establish or update your will: These are an absolute must. Create both a health power and financial power of attorney: This allows you to appoint someone else to make medical and health care decisions on your behalf if you become unable to advocate for yourself. Establish a trust: This can help your loved ones avoid probate delays and high costs. You can also distribute trust assets during your lifetime if you choose. A trust will protect your assets from creditors, keep your information private and preserve family harmony so heirs won’t fight over their inheritance.
Avoid Scams That Target Seniors: There’s an abundance of scammers who go after seniors – and fraud losses can be especially devastating to seniors. The average victim of elder fraud senior scams lost over $33,900 according to the FBI. Many of these scams involve an impersonator who pretends to be someone the victim trusts.
Never share your personal information, especially with someone who
contacts you saying they’re a government official or bank representative. They always have a sense of urgency. Set up multiple codes, passwords and security questions that only you know.
• If you ‘re suspicious about a phone call, take some time before responding or don’t answer. Block the caller’s number. Contacting a friend or family member can help you assess the situation.
• If you’re tricked into giving money to a scammer, report the fraud to the Federal Trade Commission (FTC) at ReportFraud.ftc.gov. You can also check out the identity theft protection from Experian, which monitors your credit reports for possible identity theft and alerts you of suspicious activity.
In Conclusion
Financial planning doesn’t end when you retire. Budgeting, investing the right way, paying taxes and financial objectives are lifelong habits. Seniors have unique planning needs that may necessitate the help of a financial professional who specializes in working with seniors.