A 2019 report from the Government Accounting Office indicated 29% of households with at least one person age 55 and over have no retirement savings and no defined benefit program or pension. For those with some retirement savings, the median amount of savings at age 65 was only $148,000. With Social Security providing most of the income for many households age 65 and older, good money management is an essential skill in the process of aging well, particularly with our “gift of time.”
Money-management skills include being able to construct a realistic budget that not only includes your monthly average expenses and income, but also incorporates your retirement plans such as travel, family activities and charitable contributions. Future medical expenses are a major concern since, on average, a couple over the age of 65 should anticipate $300,000 in medical costs over their retirement. Make sure your budget provides for a six-month emergency fund and annual home maintenance. Ramsey Solutions and your local bank can provide you with tools to guide you through the budgeting process.
Understanding your financial personality — how you like to use your financial resources, for example — is important in developing a realistic financial plan. Will your spending habits support your budget? Is your spending impulsive or disciplined? Your financial plan needs to be compatible with your financial personality to stay on course.
Retirees need to shift their thinking from savings or accumulation to an income or spending plan. The biggest financial fear is running out of money during retirement. Tapping into available government programs or finding a side gig might help augment a retirement income if the budget indicates possible shortfalls. Understanding how to best utilize or preserve your resources becomes paramount to your financial planning.
Managing your retirement also includes planning for other facets of your life, like housing, and formulating a plan to prepare for those needs when they occur. Even though the planning process appears to be addressing long-term needs, an unexpected change in your health might precipitate an urgent need. Anticipating possible bumps in the road will make it easier to adapt.
Several legal documents should be executed, including a will or a trust that can formalize your desires regarding the distribution of assets. Advanced directives, such as, a living will or a durable power of attorney for health care, can help define wishes for a person responsible for your care when you are ill. For legal matters, you may want to execute a general power of attorney or a durable power of attorney. You should work with your attorney to set up the appropriate documents for your needs according to Arizona law and family needs.
Advance directive documents can be registered with the Arizona Secretary of State Office to provide easy access by medical professionals when needed. A trusted member of your family or a friend should also be informed of your choices and documents.
Planning is a process. It is not an end in itself. Life is always changing and sometime those changes will affect your plans, but hopefully retirement planning helps you deal with the realities of life when they occur. Because life is always changing, it is never too late to plan.
Finding a good
To better understand the components of a good financial plan, retirees may want to consider getting help from a professional financial planner or from online financial planning tools available from organizations like AARP, National Council on Aging, National Institute on Aging or a local college. To find a capable, trustworthy financial adviser, make sure you:
- Ask for referrals.
- Check industry databases.
- Make sure they are a fiduciary, or advisers who put their clients’ interest ahead of their own, with a duty to preserve good faith and trust.
- Avoid putting too much trust in titles.
- Meet them in person and, most importantly, ask questions to ensure you understand the advice being given
Get your affairs in order
One of the most important tasks for retirees is to get your affairs in order. Many feel end-of-life planning is depressing and morbid. But not making such plans transfers the responsibility to your family or friends. Without an understanding of your wishes, some necessary and otherwise easy decisions can be difficult for people mourning your loss. It can also result in unintended consequences and legal problems with your estate.
The National Institute on Aging recommends the following steps:
- Put your important papers and copies of legal documents in one place. Check annually to see if there’s anything new to add.
- Tell a trusted family member or friend where you place your important papers. If you don’t have a relative or friend you trust, ask a lawyer to help.
- Discuss end-of-life preferences with your doctor, who can help ensure your wishes are honored.
- Give advance permission to doctors and lawyers to talk with caregivers as needed.
Source: National Institute on Aging
Ron Smith is an aging-in-place advocate and a Certified Aging-in-Place Specialist.
This story was first published in the September edition of InMaricopa magazine.