According to a recent study conducted by the Society of Actuaries, 28% of Americans 50 years old and older underestimate their life expectancy by five years or more- especially women! Underestimating longevity and one’s actual financial needs is problematic as it could lead to one outliving their savings and unable to afford their basic needs and/or long-term care.
As with most things in life, proper planning as well as open and honest communication with spouses or significant others, financial professionals and oneself is vital in ensuring long-term financial stability. None of us have a crystal ball so we never really know what to expect when it comes to what our futures look like. However, some diligence and strategic planning can go a long way. Here are six tips for helping to make your money last:
- Identify long-term goals and develop budgeting techniques that are sensible and sustainable
- Be generous but don’t give all your money away
- If possible, delay cashing in on your social security benefit
- Review your health coverage on a yearly basis
- Keep a stream of income coming in that ISN’T social security or your retirement
- Make smart investments
Long-term goal setting & budgeting
Regardless of whether you are retired or nearing retirement, it is imperative that you have a realistic spending plan that is within your financial means and works for you. The following helps when it comes to setting goals (regardless of whether they are short-term or long-term goals):
- Write your goals down
- Make your goals very specific
- Ensure the goals you set are measurable
- Set a deadline and stick to it
When it comes to prioritizing goals, an article on nerdwallet.com recommends “working [your goals] around your usual expenses, focusing on needs like food and shelter first.” Second in line, as far as priority, is contributing to emergency savings accounts (to ensure you are prepared for the unexpected) and retirement funds (to build the amount of cash you will have to live on once retired). While people may feel compelled to pay off their debts first (such as credit cards, personal loans etc.), paying off debt should happen AFTER you have accounted for necessities (ex. food and shelter) and savings accounts.
Be generous but remember, you come first
As we age, many of us find that we would much rather give gifts to our family and friends than receive gifts- albeit monetary or materialistic gifts. Similarly, the older we get the more pride we take in being able to help others. This generosity is something to admire but it is also something to watch out for. In a recent survey from CreditCards.com, 45% of older adults with adult children gave their adult children money during the COVID-19 pandemic which would have otherwise gone towards their personal finances and/or retirement savings. Life has a tendency of getting in the way sometimes and this is understandable. However, always remember that YOU come first! It is OK to help out family and friends financially when you can but be cautious as to not go overboard with giving your money away. After all, if you don’t take care of you who is going to?!
Hold off on collecting social security for as long as you can
When it comes to social security, remember this: “the more you need your benefit from your long-term security, the more important it is to postpone taking it.” If you wait until you are 70 years old or older to start collecting social security, the benefit based on your employment record is said to increase by 8% of your full-retirement-age benefit each year. This is drastically different than if your social security starts before you reach full retirement age as pre-retirement age social security checks are typically 25% to 30% less.
Ensure you are reviewing your health coverage on a yearly basis
Reviewing your health coverage and health plan is critical- especially during Medicare open enrollment periods. Plans, costs and coverage can change year after year just as your healthcare needs do. Make sure you are selecting the Medicare insurance plan that is best for you using the Medicare Plan Finder tool.
Have alternative streams of income aside from social security and your 401K
After the first few years of being retired, it is not uncommon for people to start to think about getting a part-time job to get them out of the house, help them socialize and bring in some additional cash. Even if the money you’re making in a part-time job isn’t enough to stash away in a savings account, it is still helpful as it keeps you from dipping into your retirement. In addition, retirees that pick up a part-time job are often found to be more optimistic, positive, sharp-witted and fulfilled. So, aside from the financial benefits, re-entering the workforce can provide some favorable mental and emotional benefits as well which is always a good thing!
Thinking about a rewarding part-time job? ABC Home Healthcare Professionals is hiring shoppers, companions and homemakers!Help seniors live safely and independently in their homes- apply online or call us today at 781-245-1880!
Make smart investments
Smart investing is the key to exponential wealth. The general rule of thumb for aging individuals is to have several years’ worth of living expenses in cash or safeguarded investments like CDs and short-term bonds. Playing it safe when it comes to investing is paramount but you do want to have some money to play with as far as investing more aggressively as that is typically where you will get the highest return on your investment. Managing an investment portfolio on your own can be challenging but that is why having a go-to expert in your corner, such as a financial planner, is crucial! Don’t have a financial planner but interested in talking to someone? Email michelle@abchhp.com for some recommended professionals.
