As working life winds down, you may find yourself evaluating finances and assessing the biggest financial threats to your standard of living. For millions of seniors, retirement will not be filled with tee times and travel: Many will have concerns over outliving your money and paying for rising health care costs will fill your days. Financial realities often spoil the dream you once had for retirement. How will you overcome the monumental challenges that lay ahead?
Here are some of the top financial threats redefining what retirement will look like for those who are less prepared.
Top Debt Concerns Include
- Paying off the mortgage to reduce housing costs
- Paying off student loans or transferring payments to adult children whose education the loans paid for
- Paying off or working with a debt management provider to get credit card debt under control
- Eliminating reliance on debt
Debt is a new phenomenon among seniors as mortgages, student loans, and credit card debt is carried into retirement. Debt payments increase the amount of money required to maintain a quality of life and eat through savings faster. The higher cost of living combined with a fixed income creates greater price sensitivity and requires sacrificing today's needs to pay yesterday’s bills.
Running out of money
Top Money Concerns Include
- Earning extra money to stretch out savings
- Difficulty re-entering the workforce due to age discrimination
- Physical ability to continue working if finances require it
- Increased life expectancy meaning retirement funds must go further
- Potential threat to reduce social security or pension benefits
An estimated 52% of seniors rely on social security for 50% or more of their income. Social Security provides 90% of the household income for 47% of single seniors. Statistics on savings rates are just as gloomy, leaving millions vulnerable to financial shortfalls when they are no longer able to work.
Top Investment Concerns Include
- Not being able to find safe investments that outpace inflation
- Company stability with guaranteed assets (Such as banks, pensions, and annuity companies)
- Market volatility that increases risk without time to recover if the market crashes
- Low savings rate tempting seniors to pursue riskier investments
- Trusting investment advisors that may recommend higher risk products or complicated investments that are difficult to understand
- During retirement, seniors rely on conservative investment options that are often directly linked to prevailing interest rates. Safe investment such as CD’s, money market accounts and bonds are less volatile, making them an attractive investment for retirement. When low-interest rates reduce returns below inflation levels, seniors lose buying power. With life expectancies growing, even those who have planned for retirement may find themselves worried about money.
Rising Healthcare Costs
Top Health Care Concerns Include:
- Increasing cost of insurance premiums
- Rising out of pocket costs
- Skyrocketing prescription drug costs
- Lower reimbursement amounts
- Lack of coverage for critical areas such as eye care, dental, and hearing needs
- Increase in disease, limiting your abilities and increasing reliance on others
- Medicare coverage changes from year to year based on agreements between legislators and the healthcare providers. The result is often lower payments for medical procedures and a declining number of doctors willing to serve this sector. The aging process often requires expensive medication with high out of pocket costs.
Top Affordable Housing Concerns Include:
- Paying off the mortgage on the existing home
- Paying for changes in the home to accommodate limited mobility
- Downsizing to a more affordable home o r one with a more senior friendly layout
- Paying rising costs in maintenance, insurance, and taxes
- Finding low costs housing when money runs low
- Remaining in the home as long as possible and financing services to make that happen
Today, nearly half of seniors are still paying a mortgage, which puts them at risk of losing their home if income declines. Mortgage payments can eat up 30% or more of household income, putting a strain on fixed income budgets. Upgrading the home to meet the needs of aging bodies is expensive and may be out of reach for those on a tight budget.
Long Term Care
Top Long Term Care Concerns Include:
- Insurance coverage to pay for long-term care costs
- Finding quality in-home care to remain independent as long as possible
- Potential reliance on family members and becoming a burden
- Paying for advanced care needs not covered by Medicare
Medicare only provides limited coverage for long-term care needs. Baby Boomers, with limited savings, may struggle to pay for needed services as health declines.
Transportation Top Transportation Concerns Include:
- Cost of maintaining and insuring a vehicle and upgrading as needed
- Covering alternate transportation costs when driving is no longer an option
- Finding services which provide essential such as meals, socialization and banking options
- Fear of becoming homebound
- Increased reliance on others for basic needs
- Losing of the ability to drive can significantly impact independence and increases reliance on others. Buses and other public transportation options may not be readily available, limiting mobility. Loneliness can be a side effect of changes in transportation options. Increased dependence on others may leave them depressed, feeling like they are a burden to others, and increasing their vulnerability to financial scams.
Fraud and Scams
Top Fraud and Scam Concerns Include
- Use of fear causing seniors to panic and divulge personal information to scammers
- Family members or caregivers stealing retirement funds
- Those providing services overcharging
- Inability to fully care for themselves, requiring them to put their trust in strangers
Everything from phone and internet scams that stea l savings, to service providers who overcharge or complete unnecessary work. These forms of fraud reduce seniors’ ability to pay for their needs. The process of aging puts real limitations on what seniors can do and requires them to rely on others.
As seniors navigate the stormy waters of retirement, caution must be taken regardless of your current financial picture. Reaching out for services that will assist with stretching your dollar will pay big dividends over the remainder of your life. Long term financial needs are unpredictable, which is one of the reasons planning for retirement is such a challenge.