As people live longer and the cost of healthcare increases every year, financial planning for seniors has never been more important. According to the Government Accountability Office, 29 percent of those 55 and older have neither retirement savings nor a traditional pension plan. For those who did save, the average amount is $126,000. That comes out to an average inflation-protected annuity of only $470 per month over the course of their retirement, which is simply not enough.
For that reason, seniors need to secure their finances in order to ensure a firm grasp on their well-being as well as that of their loved ones. These steps will help seniors create a better path ahead for themselves and their families.
Speak with Family and Loved Ones
Be open and honest with family about the financial road ahead. This is not an easy conversation to have. It is hard for seniors to begin sharing financial responsibility with their children after having been the care providers. But when all parties have a mutual desire to look out for one another, they can prepare for a better financial future.
This is a good opportunity to make certain designations, such as the power of attorney for finances and for healthcare. Making decisions early will eliminate confusion and frustration later.
Consult with a Professional Retirement Planner
Working with a professional will make the process significantly more manageable, whether that person is a financial advisor, lawyer, or an accountant. A professional can help choose the right investments, decide how much current income should be devoted to investments, and figure out what forms or procedures are needed. These decisions are important now to avoid costly mistakes that can add up later when savings are needed most.
Collect Important Documents
In retirement planning, there are four estate planning documents that are of top importance with a fifth document that should be considered. Having these documents in place allows someone to choose who has the power to be there for them in the event they are unable to adequately make important decisions and to specify what happens at their death.
Last will and testament: Clearly establishes who receives which assets and personal property, with an executor or executrix named to carry out your wishes after death.
Durable power of attorney for finances: Gives a trusted individual control over finances in the event of incapacitation.
Durable power of attorney for healthcare: Designates someone to make healthcare decisions in the event of incapacitation.
Living will: Outlines your wishes for the use of or withholding of extraordinary medical measures at the end of life.
Revocable living trust: Instead of solely relying on a last will and testament and a durable power of attorney for finances, a revocable living trust names trustees to manage your assets during your lifetime and for the benefit of your heirs after your death in accordance with your express wishes, and helps to avoid probate.
According to elder law attorney Catherine Schott Murray of Odin, Feldman & Pittleman in Reston, the earlier these documents are in place, the better. “The planning process allows individuals to have some sense of control . . . and allows those individuals to determine the disposition of their affairs on their terms,” she says. “It can also help avoid conflicts within families and minimize any contests that may arise after.”
Decide How Much Money is Needed
Figuring out how much is needed to live an enjoyable lifestyle while also having enough for unexpected events is one of the most important parts of retirement planning. According to the US Bureau of Labor Statistics, seniors should have $3,000 to $4,000 a month available for expenses, or about $1 million over the course of retirement. These expenses include food, housing, transportation, healthcare, insurance, entertainment, and other unexpected costs. With the right help and early planning, it is possible to reach that amount and enjoy retirement.
