By Kayla Harris
If retirement is on the horizon for you, you may be doubling down on your efforts to prepare your finances. But financial literacy can be confusing for adults of any age, or education level. You should consider checking in with a financial advisor, but you should also keep the following steps in mind to make managing finances in retirement a little easier.
Make Health Expenses a Top Financial Priority
Thinking about finances isn’t always fun, but it is always necessary. Managing your money becomes even more important during retirement, especially when so many American seniors are filing for bankruptcy. Bankruptcy can be a huge financial setback for your retirement goals, and medical expenses are often the reason for bankruptcy after age 65. So how can you protect yourself from going broke without sacrificing your health? For starters, you can include out-of-pocket medical expenses in your overall retirement planning. Most seniors will need to set aside around $200K per adult in order to have enough for rising health care costs. Of course, adults over 65 can also rely on Medicare for help with medical expenses. But you need to do some homework to make sure you get a plan that fully covers you, especially since there can be so many coverage gaps in standard Medicare plans. Retirees looking for additional peace of mind may want to think about Medicare Advantage plans, like those from Humana, to offset expenses for things like eye exams, dental check-ups and medications.
Make Sure You Can Age in Place in Your Home
Aside from medical expenses, the costs of long-term care can also take many seniors, and their loved ones, by surprise. Assisted living and nursing homes can run anywhere from $40K-$90K each year, which can quickly eat away at your retirement savings. A good way to offset these enormous expenses is to make plans to age in place within your own home longer. Before you retire, set a goal of paying off your home, so that you will have one less major expense to worry about in retirement. If you cannot pay 100 percent of your mortgage off, at least research ways to reduce your monthly housing costs while building equity in your home.
If you do need long-term care in the future, you can use that equity to fund required assistance. But the ultimate goal is to stay in your paid off home for much longer, to avoid those expenses entirely. That means making some accessibility changes to your house, and also paying for them. Use that equity you built into your home or look for credits and grants to help with costs.
Create Savings Goals But Leave Room for Fun
There’s no question that saving money can make a difference in terms of financial security during retirement. Before you drastically slash your expenses, and perhaps lower your quality of life, know that some things are actually less expensive in retirement. Your tax savings are bound to be bigger, but you will no longer need to worry about paying for transportation, dry cleaning or other employment expenses. While those may seem like trivial savings, add them all up and you have quite a bit of money to put toward some golden years fun.
So go see more of the world, volunteer with a cause you’re passionate about, or consider starting your own small business. A small business or side gig can be an easy way to pad your income during retirement, and there are tons of opportunities for seniors. Pass on your wisdom to younger generations by being a tutor or travel guide, or open up your home to care for children or pets.
The truth is, no amount of online advice can ever replace the expertise of a financial advisor. Retirement is one of the few times in your life when professional financial advice is well worth the investment. Even without professional advice, however, you can at least learn to manage your money a bit better. Setting smart financial goals and budgeting wisely will allow you to enjoy your golden years even more.
Photo Credit: Pixabay
Kayla Harris is the founder of Elderimpact. Her mission is to empower seniors against ageism by making handy the information they need to keep controlling their own lives.