Financial concerns are real, especially later in life. We know that. There is uncertainty about all the costs of life. It’s normal to be afraid of outliving your money. I get it. Your life shouldn’t be just another horror movie in which you play the lead role. Waiting for the next disaster to happen is not a plan; It’s just a show of complacency. You can change the role you play in the movie Money of Your Life.
Choosing not to make a decision is a decision
Things will happen to you that will take your breath away. It could be an accident, health issues, or that gray divorce that slaps you in the face and leaves your wallet empty. “The biggest financial fear for nearly one in two seniors is not saving enough money for retirement,” SeniorLiving.org reported.
Things you can count on:
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death. We will all die, whether we like it or not. But did you plan for it? You should think about planning your later life. Yes, it’s hard to talk about, but you’re more likely to die slowly than suddenly. In fact, according to the Department of Health and Human Services, 70% of people age 65 will require long-term acute care. Women spend an average of 3.7 years in a nursing home, while men spend an average of 2.2 years. Skilled nursing home care can cost more than $100,000 per year on average. According to the National Council on Aging (NCOA), “80% of families with older adults either cannot afford basic and long-term care needs today or are at risk of not doing so in the future.”
Most people do not deal with the issue of death. According to LegalZoom.com, only 33% of US adults have specific plans. In fact, a Caring.com survey found that 60% of people without a will reported taking no action to create a will, nor had they created a living trust or other estate planning document. We make better plans for our pets, as shown in a Trust & Will study where 77% of pet owners have appointed a guardian for their pets.
This is a long way to get to my point, which is that you need to plan for this financially, otherwise the burden will shift to your loved ones.
Estate planning will help you decide and plan the transfer of your assets and may include a trust to designate the transfer of some or all of your assets as well. You need end-of-life plans that include a will, a living will, and an advance health care directive stating your wishes. Talk to your financial advisors, loved ones, and your attorney to get the ball rolling.
Taxes. The other The thing we can count on is taxes. Seniors have special rules and benefits that apply to them. You should work with a tax professional to make sure you get the maximum deductions and don’t pay too much in taxes. People who are 65 or older can use IRS Form 1040-SR as their tax form.
There are other things to consider, like changes to retirement plan rules that are great. Many retirement plans, such as IRAs and 401(k)s, come with deferred taxes that you need to know how to handle, such as when to take required minimum distributions (RMDs).
You may also consider setting up trusts to avoid paying certain estate or inheritance taxes. In March, the IRS changed some rules that may impact your estate planning, so be sure to consult your financial and tax professionals to understand how this could affect you and your loved ones.
It’s not all your fault for not planning. Maybe you had planned to continue working, but then things changed, and you were forced out of the workplace earlier than expected. Many companies force seniors to retire before they think they will retire. Pew research suggests that the pandemic has caused a jump in early retirements for baby boomers, but you may have also seen many older workers pushed out to make room for cheaper, younger workers as well. ProPublica and the Urban Institute analyzed this and found that “28% of long-term, stable employees experience at least one adverse layoff by their employer between turning 50 and leaving for retirement.”
If you retire early, you won’t be able to build up the savings you thought you could get away with.
The other thing that happened to seniors was debt. SeniorLiving.org reports that one in four seniors say they fear not being able to pay their current debt. Medical debt, credit cards, mortgages and student loans weigh heavily on them. CreditKarma reports that baby boomers now carry an average of more than $52,000 in debt. This can significantly erode your retirement income that you thought you would have.
Inflation is also a lurking monster. We tend to view our finances in today’s dollars rather than in the future. In thirty years at an annual inflation rate of 3%, you would need about $2,400 to buy the same amount of goods that $1,000 would buy today.
A large family home may be very large
It is human nature to hold on to the family home for too long. That’s because Family House. I raised children there and built family memories.
But the children may be gone, and so may the dog. Memories never die, they go with you wherever you go. The care and maintenance costs of your large home can get really scary. Build downsizing into your plan.
The new dance: the side hustle
A side hustle is a modern name for what used to be called a part-time job. This may not have been your idea of how you would work later in life, but life happens, and we all need to embrace it and make money where we can.
There are websites online where you can use your talents to train, mentor and teach professionals or children. You can also learn some new skills, such as being a notary. You can even become a mobile notary to earn money and choose your own hours.
If you love children, you could consider offering daycare services, babysitting, or even serving as a chaperone for other seniors. Many seniors become drivers for ride-hailing services like Uber or Lyft or food delivery apps like Grubhub or DoorDash.
You can also turn your hobby into a money making idea. You can train children in a sport or play a musical instrument, teach knitting or other crafts, or even sell your wares at local markets and craft fairs. You can do graphic design, writing, editing, bookkeeping, work as a virtual assistant, or develop websites for others. Be creative.
Benjamin Franklin warned us that “nothing is certain but death and taxes.” But you can take proactive steps to avoid the inevitable consequences of financial challenges that can sneak up on us to say “boo.”
This article was written by our contributing advisor and presents the opinions of our contributing advisor, not Kiplinger’s editorial staff. You can check the advisor’s records with second Or with FINRA.