Security Mutual Life recently reported that 20% of American adults older than 50 have no savings! Although this is a concerning reality, it’s also never too late to build solid financial habits.
Preparing for retirement is all about having a brilliant financial plan. Smart financial planning for seniors must address all of the following issues:
- Increasing money coming in
- Decreasing money going out
- Saving vs. paying off debt
- How to protect savings
In this article, we’ll discuss the long-term objectives your retirement planning should aim for and a few short-term tricks to help you get there. Keep reading to learn more.
Squash as Much Debt as Possible
Debt is the last thing you want to carry into retirement. Carrying debt is common because many people put too much towards saving and not enough towards debt repayments while they’re still working. However, this backfires because the person ends up having to live off less than their fixed income during retirement.
Settling your debt first is an excellent foundation for your retirement plan. Most Americans can still get themselves out of debt on their own, but if you can’t, consider debt counseling. There are professional services that help seniors consolidate and pay off their debts.
At first, it may seem contradictory, given that one of our goals is to decrease the amount of money flowing out. However, this is exactly how to tackle points 1 and 2 if you have debt.
The Power of Downscaling
If you take a strategic approach to downscaling, you can decrease your expenses while also getting cash to boost your financial position. The right downscaling approach also differs between people depending on their circumstances.
Most people sell their larger property and move into a smaller property, but downscaling doesn’t have to mean selling your large property. If you’re in the right position, renting your property out and moving into a senior living community could be more stable in the long run.
Relying on a rental income to pay for community living is one of the best senior care financial strategies. It allows you to use your pension or retirement funds as disposable income.
Downscaling can also refer to letting go of movable property that doesn’t really add much value to your life. Many people pick up an expensive hobby at one point, only for it to start costing more than it’s worth later. Some examples include:
- A boat you might not use too often
- A sports car or SUV that costs you more than it saves you in convenience (fuel, insurance, repairs, etc.)
- Caravans or RVs
Even selling a large collection of smaller items like old cameras, watches, tools, and the like at a yard sale can buy groceries and pay utilities for a month or two. That extra breathing room can make a world of difference to your financial planning. Decluttering also comes with psychological benefits, not just financial ones.
Structure Your Investment Portfolio Well
If you have a robust investment portfolio, it’s worth investigating how it should be structured for retirement. Before you retire, you will focus on saving and budgeting for senior living. The types of assets you’ll be looking for will be:
- Stock that pays dividends
- REITs
- Fixed Annuities
However, your mix of assets must change once you retire. It’s much harder to recover from a loss once you’re on a reduced or fixed income. Financial planning for seniors after retirement should, therefore, pivot to a lower-risk basket of assets.
The best way to make this change is with the help of an accredited financial advisor. They’ll have the best insights into the types of assets and investment strategies that would suit your unique circumstances.
Tips for Successful Financial Planning for Seniors
Busting debt, downscaling, and saving are larger ideas you can think about when planning your finances. However, applying them to an individual’s life takes the form of small, detailed, practical steps.
Work Well With Your Income
Freeing up a few extra dollars every month can make a world of difference. Saving 15 cents of every dollar you bring in is typically all you’ll need to build a comfortable retirement fund. The further away retirement is for you, the less you need to save monthly for a comfortable retirement.
With high-interest short-term debts, you’ll want to put everything into settling those accounts. However, paying 8% more every month for medium to long-term debt can take years off your repayment timeline.
Keep Your Insurance
One of the first “expenses” people cut back on is their insurance, which can have negative consequences. Making monthly insurance payments mitigates the risk of substantial, expensive mishaps. For example, freak accidents or illnesses leading to hospital stays can decimate your financial future.
Insurance plays a vital role in retirement planning for elderly people. It protects your financial future from present risks and acts as a plug for money potentially flowing out at catastrophic rates. Specific forms of elder insurance can also help pay senior community living costs.
Know What You’re Aiming For
Many people struggle to capture how much they need in their retirement fund with a straightforward number. One can remedy this by considering the living options available and comparing them to their needs.
Once you’ve seen what’s available and what each option costs (monthly or annually), you can set a target amount to save towards. Hitting a clear target is much easier than saving towards some vague, undefined goal.
Make Good Decisions For Your Future Today
It’s never too late to get your financial affairs squared away for retirement. For most people, financial planning for seniors is more about reorganizing estates in order to:
- Increase secondary sources of income (rents, dividends, etc.)
- Decrease expenses
- Get rid of debt
- Protect savings
The best elderly care financial advice is to get a financial expert to help you pay off debt and put your money behind the right assets. You’ll also want to be intentional about budgeting and cutting down on non-essential expenses.
These simple goals can help make your dream retirement an affordable reality. Terra Bella Rock Hill is also here to help give you the best community experience in South Carolina. Contact us today for more assistance with your retirement.
