As you reach your golden years, financial planning becomes more important to think about than ever. What exactly makes financial planning for seniors unique?
It’s a time when you want to enjoy the fruits of your labor and be confident in the knowledge that your finances are completely in order. However, for seniors thinking about financial planning, there are certain factors that you need to consider.
Here are 5 things to be aware of…
1. Retirement Savings
One of the biggest challenges you can face as a senior is managing your retirement savings.
You need to have a clear understanding of your specific retirement income and expenses, and then come up with a plan to ensure that you have enough savings set aside to cover any unexpected costs or emergencies.
Some helpful tips for managing, stretching and even growing your retirement savings include diversifying your investments, regularly reviewing your portfolio and seeking professional advice when needed.
Financial advisers like those at Iron Point Financial will likely recommend that in addition to your basic income/expenditure review, you make sure to put yourself in the most tax-advantaged position possible now, for example by setting yourself up with income from investment vehicles including 401(k) plans, Traditional and Roth IRAs, and the like.
It’s also important to accept other sources of help where you can find it — and that’s where being on top of your social security comes in.
You can create an account on the official US government website to check personalized estimates of payments you will receive, as well as access to resources including a benefits calculator and dedicated customer support.
Alternatively, for a quicker, rough estimate of your social security benefits, you can head straight to this page on the SSA website.
2. Healthcare Expenses
As you age, it feels harsh but accurate to say that your healthcare expenses are likely to increase.
Federal data from 2022 suggests that US households led by seniors 65 or older spend an average of $7,540 a year on health care. This is why it’s crucial to have a plan in place to cover these costs in particular.
Medicare may not cover all of your medical expenses, so it’s important to research other options such as “Medigap” supplemental insurance or long-term care insurance.
It’s also important to regularly review and update your existing health insurance coverage, as your needs may change over time. This includes accounting for insurance types you might not have thought about before such as vision and dental insurance; you might want to consider taking out new insurance types like this as you get older.
For some seniors thinking about financial planning, it might also be relevant to look into special social security benefits or military veteran benefits, as these can offer a lot of aid and value as you age. Keeping up-to-date with exactly what those benefits are can help reassure you that your healthcare expenses will stay in check.
3. Estate Planning (Legacy Planning)
Estate planning, or its more purposeful alternative, Legacy Planning, is essential for all seniors who want to make sure that their assets are distributed according to their exact wishes after they pass away.
Only 53% of American adults aged 50-64 have a will in place, which serves to highlight how important this aspect of financial planning for seniors is (Gallup).
So what exactly is legacy planning?
Simply put, legacy planning includes things like formalizing a will to manage your financial assets after you pass away, assigning a power of attorney for your health needs (a “living will”), and setting up trusts where desired.
It’s also important to regularly review and update these documents to reflect any changes in your life or assets. Just because you set up a will a few years ago, doesn’t mean it’s still accurate today — so it’s important to keep track of it.
For more on the ways Legacy Planning can work for you, check out our free resource here.
4. Budgeting for a Fixed Income
Many seniors rely on a fixed income, whether it be from retirement savings, pensions, or social security. This could make your budgeting especially challenging, as your expenses might increase while your income remains the same.
It’s important for you to create a realistic budget ahead of time that accounts for all essential expenses and allows for some flexibility for unexpected costs.
Financial Planning for Seniors: Tax Efficiency
This is also where it’s really important for seniors thinking about financial planning to consider their tax arrangements, and especially any credits and deductions available to them.
You might want to look through your tax affairs, keeping an eye out for the following deductions and credits:
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None of these deductions or credits are necessarily adding to your monthly budget in a direct way, but by making sure you maximize your tax efficiency, you will at least be ensuring you are not losing money during retirement.
Depending on your individual circumstances, you might even be able to remove your tax obligations entirely! It all depends on how proactively and diligently you manage this area of your financial health now.
5. Avoiding Financial Scams
Unfortunately, seniors are often targets for financial scams aimed at taking advantage of your perceived vulnerability and naïveté. That’s why you need to stay vigilant and be wary of any offers that seem too good to be true or require a lot of personal information, especially online or through unsolicited phone calls. Be sure to research and verify any investment opportunities or charities before parting with your money.
In addition, it’s a good idea to have a trusted family member or friend involved in your financial planning to help catch any potential scams. You could, for example, consider running any decisions by this person before going ahead with your choices.
Remember, if something doesn’t feel right, trust your instincts and maybe even seek advice from a qualified professional.
In fact, the Financial Industry Regulatory Authority (FINRA) has put specific rules in place to deal with these very scenarios: FINRA requires all certified financial planners registered with them to:
“make reasonable efforts to obtain the name of and contact information for a trusted contact person upon the opening of a non-institutional customer’s account […]
The trusted contact person is intended to be a resource for the [certified financial planner] in administering the customer’s account, protecting assets and responding to possible financial exploitation.”
(FINRA)
What this means in practice is that going to certified financial advisers like those at Iron Point Financial will offer an extra layer of protection against scams. In addition to being certified financial planners (CFP), our advisers are also retirement income certified professionals (RICP), so when it comes to helping seniors with financial planning, you can be sure that you are in safe hands, and that we will actively work with you to reach your financial goals.
Key Takeaways & Closing Thoughts
- Planning for retirement savings early and consistently contributing is crucial for a comfortable retirement.
- Your healthcare expenses are likely to increase with age, so it’s important to factor them into your financial plan.
- Estate / Legacy Planning ensures your assets are handled according to your wishes after you pass away.
- Budgeting is essential when living on a fixed income, so that you can make the most of your funds and avoid overspending. Maximizing your tax efficiency helps, too.
- It’s important to be cautious of financial scams that target seniors, as well as to seek advice from trusted sources before making any financial decisions.
Financial planning for seniors may seem daunting at first, but with careful consideration, proper planning, and the right help, it can become manageable and even empowering. Taking the right steps now will help to ensure that your finances remain secure, and allow you to enjoy your golden years knowing that you have a system working for you behind the scenes.
It’s never too late to start planning, and seeking professional advice can help greatly in managing and protecting your finances. Why not schedule an appointment today to learn how we can help you pursue your financial goals?
Or, if you don’t feel ready to talk to an adviser just yet, but you enjoyed this content, why not sign up for regular email updates from our blog, so that you don’t miss future posts?
Iron Point Financial is here to empower you to secure a brighter tomorrow. We operate physical offices in Grove City, PA and Greenville, PA.
We primarily serve residents of Pennsylvania, Ohio, West Virginia and Florida but we also have security registrations for 22 other states across the continental USA.
Further Resources
- Elder Financial Abuse: What It Is and 5 Tips on How to Protect Yourself
- Why work with a Certified Financial Planner (CFP)?
- Why work with a Retirement Income Certified Professional (RICP)?
- Catch-Up Contributions for 401(k)s and IRAs (IRS)
- Tax Credits & Deductions for the Seniors (Senior Living)
- Financial Stewardship: What it Means and Why It Matters
Disclosures
- For a comprehensive review of your personal situation, always consult with a tax or legal advisor.
- Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.
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