How to Plan for Retirement in Your Senior Years
Many seniors today are working because they never learned how to plan for retirement. Some are choosing to work while others are highly dependent on the extra income to get by. If you’re in your 50’s and 60’s, you’ve probably asked these questions: “Will I have enough money to get through my life? What age will I be able to stop working? Will I have opportunities to really enjoy my retirement years?”
Fortunately, most people approaching or in their senior years still have opportunities to change course, plan for retirement, and secure their financial future. At this stage of your life, your needs are quite different. Most likely your children are grown and on their own. Your mortgage is paid or very small. Your expenses and debt are lower than at any other time in your life. You might have some investments, life insurance, and long-term care insurance. But do you know what retirement strategies you need for your financial future?
A retirement savings plan to meet your needs as you approach retirement:
if you’re approaching or in your senior years and just starting to plan, your age, health status, tolerance for risk, and length of time to grow investments is going to impact your results. But with good health, an adequate income, and without excessive debt, most people can benefit from financial strategies that reduce unnecessary spending, protect assets, cover expenses, and maximize their income for as long as they might live.
Financial planning always begins with a detailed analysis of your financial situation and needs. This includes the age you plan to retire, health status, income and expenses, mortgage, projected future expenses, existing life insurance information, existing long-term care information, savings, retirement accounts, spending habits, knowledge and beliefs about money, and your tolerance for risk. Based on your analysis and input, we prepare a customized plan based on retirement strategies that will cover your expenses and provide you with financial security and a sufficient income for meeting your lifetime needs.
Customary considerations when planning for retirement later in life:
Most people go through their life spending money erratically without a budget. They may go for coffee everyday, eat out regularly, or use unnecessary gas by making several trips to the store. Some make regular purchases in expensive convenience stores instead of clipping coupons or shopping where grocery and personal care products are much less costly.
A big part of helping you to generate enough income for life is to reduce unnecessary spending. You will learn how small changes can produce big money growth. Your commitment to using a budget that eliminates impulsive unnecessary costly purchases will change your life. In the process, you will be empowered to take control of your money so that you can get what you most need and want in your life.
More and more seniors are remaining in a job or looking for new employment instead of retiring. There are many reasons why people choose to work during normal retirement years. They may work out of boredom and a desire to stay busy. For them, it is important to consider how employment will impact their tax liabilities. If employment puts them into a higher tax bracket and they don’t need the money, volunteering their time may be a better choice. Many seniors today depend on the additional income to pay their bills. Others work while they still can in the hopes that they can continue to save, invest, and grow their financial reserves. This may also allow them to achieve some or all of their retirement goals for travel, helping their family, and leaving a legacy.
Not everyone wants to be earning a living in their senior years. But for those who can and make that choice, it provides options to think and plan ahead. It can be a path to securing their financial future today so they can have what they need and want tomorrow.
Life insurance becomes very expensive with increased age. Many older adults don’t qualify due to a declining heath status. But some insurance to cover final expenses is recommended and available for a reasonable cost regardless of your health.
If you have an existing term or permanent life insurance policy, we analyze it’s value for meeting your needs and goals. If it is a permanent life policy that is paid and provides you with a sufficient death benefit, that is likely to be all that you require. If you have an existing term policy that you’ve paid on for many years and the premium is affordable, it is likely that you’ll want to continue that coverage until the premium becomes excessive. At that time you can purchase final expense insurance.
Long-term care is a type of insurance that provides you with limited assistance in your home or in an assisted living facility when and if you meet certain criteria. Although long-term care is a excellent protection at a very reasonable cost when you are young, obtaining an affordable policy later in life is quite expensive and requires that you qualify. When your income is adequate and provided you are eligible however, it can be a good option for older adults to keep them in their homes as long as possible.
Index and whole life annuities provide an excellent option for people who don’t have much time to grow investments, have a low risk tolerance, and are looking for a stable amount of income that can last their lifetime, regardless of how long they live. Fixed annuities provide for many flexible payment options and offer a no risk form of investment. Money in IRAs are often used to fund annuities with the tax-deferred status retained until annuitization when taxes are paid on distributions. Many fixed annuities have no fees charged to the client.
The Social Security Act was established by Congress in 1935 to help supplement retirement incomes. If you and/or your spouse paid social security during your working careers, you become eligible to collect benefits in your senior years. Because fewer employees today are paying FICA payroll taxes which fund social security and there are larger numbers of seniors collecting benefits, there is a shortage of money to pay for social security.
This shortage has already impacted the Baby Boomer generation who started turning 65 back in 2011. Currently the age in which one can collect social security has increased and depends on the year of birth. People may start collecting social security early at age 62 or collect maximum benefits by waiting until their full retirement age. Spouses can collect half of a social security benefit amount whether or not he or she worked.
Many people assume that their tax bracket will be lower at the time of retirement. Because taxes are based on combined spousal income with fewer expenses to offset it, many couples find that they are actually in a higher tax bracket after retirement. They may not know that they will pay taxes on their total income earned from social security, salary, interest and capital gains, retirement account withdrawals, and gains from annuity distributions. This is why tax planning for retirement is so important.
Legal needs during retirement include trusts or wills, Durable Power of Attorney, and Living Wills. These are protections for you and your assets that become increasingly more important as you age. Our team includes estate and asset protection attorneys who can help you by reviewing and updating existing documents or creating new ones.