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How to make sure your retirement savings lasts the rest of your life

Terence O’Malley Elder Law and Estate Planning Attorney, Licensed Financial Advisor ExpertSeniorPlanning.com

Financial planning for seniors requires recognition that an adjustment in lifestyle may be required to avoid outliving one’s wealth. Depending on how much money you will be getting for retirement, you could find yourself having to get a part time job in order to cover unforeseen costs. Follow this advice to ensure your retirement income will last for the rest of your life.


Do

Do consider the adjustments you must make upon retirement

Retirement is a period of adjustment. You have to adjust to no longer going to a workplace on a daily basis. You have to adjust to being home during the workweek and filling that time doing something of value to you. You have to adjust to being around a spouse or a partner on an extended basis. You also have to adjust to no longer earning the same level of income that you enjoyed while you were working. It is not unusual for persons to exceed their financial budgets during the first few years of retirement as they learn how to scale down their spending.

Do put your personal affairs in order through effective estate planning

Many people delay until they are approaching retirement before implementing an estate plan. One reason why is because it isn’t until later in life that they believe they have enough assets to worry about passing on. Also, when you are young there is a sense of invulnerability - that death is a remote possibility for the time being - and as such there is no rush to put your affairs in order. However, estate planning is more than just designating who will inherit what when you die. Estate planning also includes what will happen in the event you be become incapacitated, unable to take care of yourself. It is well worth the time and relatively little effort to set up a living trust, powers of attorney for financial and health matters and HIPAA authorization forms. There are many ways that seniors can protect their assets, while at the same time ensure that they are passed on according to your instructions.

Do fund your retirement plan at the maximum amount

If your employer offers a 401(k) plan and you are over age 50, bite the bullet and put the maximum amount allowed into your plan. Assuming no appreciation or losses, over the course of ten years you will set aside about $230,000 to help sustain you through retirement. That amount is even greater if your employer matches your contributions.

Do an honest audit of your financial situation

Life is expensive, and sometimes seniors fail to recognize those things that chip away at their wealth: inflation, property taxes, insurance, homeowners association dues, major repairs, and of course life longevity. Look at your life expectancy by using the tables provided by Social Security and determine how long on average you can expect to live.

Do beware of the invisible mortgage

Seniors have a tendency to believe that once the mortgage on their house is paid off, that they own their house free and clear. In fact, later in life the house starts to own them. It costs a lot of money to sustain a house’s value. Let me put it this way, if you deposited $100,000 into a savings account and the bank told you that you will have to add $7,500 every year just to sustain the account’s value at $100,000 would you take that deal? Probably not. When you own a house you have to sustain its value through general upkeep accompanied by major repairs. Over the course of ten years you will have paid $75,000 in repairs just to sustain the value of the house. Whether the house appreciates in value is subject to many factors beyond a senior’s control, and those factors frequently can depreciate a house’s value over time.


Don't

Do not fail to plan on tightening your financial belt

Sure, that morning latte’ was justifiable when you were working, but spending $25 a week on things like coffee adds up to a lot of money over time. Eat out less often, take the time in advance to prepare meals that will provide leftovers and save money. Consider keeping just one car rather two (or more). Cancel premium cable channels, walk more and drive less, don’t overspend on lavish vacations.

Do not expect Uncle Sam to provide long-term care for you

Medicare is a health insurance program for seniors, but it will not cover long-term care expenses in the event you find yourself requiring those services. Medicaid is an impoverishment program that does not allow you to retain much in the way of assets. Over-reliance on the government will disappoint you and cause you to spend money in ways that siphon your wealth.

Do not plan on doing nothing

You will go stir crazy if you don’t have some plan in place for ways to occupy your time. Plan on working part-time or volunteering, things that will reward you with fulfillment.

Do not keep all your money in stocks

The stock market can be a dangerous place for seniors who do not have the luxury of recovery if there is a major downturn in the market. Keep a balanced portfolio and use the services of a reputable financial advisor to put your money into investments that are less subject to the instability of the market and can provide needed income.

Do not wait for a medical emergency

The time may come when your house is no longer the ideal locale for you to live. Research independent living communities and do a cost/benefit analysis of what it would take to live in a community and how that might save you money in the long run, in addition to creating a lifestyle that will keep you engaged and mentally sharp. If you wait for a medical emergency and then have to move into an assisted living or skilled nursing community, you will often pay more than if you were already a resident where those levels of care are provided. Also, you will be in crisis mode when looking for a new home and it will cause stress for you and your family.


Summary
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There are many strategic moves - none of which are a complete answer - that seniors can take to ensure that they don’t run out of money. It requires discipline, strategic planning and an approach to living life on a smaller basis with a smaller budget than before. One’s house was a great investment earlier in life, but for a senior the cost of sustaining a house may no longer be worth the expense when there are other living options that are more suitable to the needs, comfort and care of a senior. Also, having your portfolio heavily weighted in risky investments like stocks can decimate a portfolio with a sustained bear market. Long-term care insurance is expensive, but it is a blessing if you are faced with chronic long-term care in a skilled nursing environment.


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Terence O’MalleyElder Law and Estate Planning Attorney, Licensed Financial Advisor

Terence O’Malley is an attorney and licensed financial advisor who is a popular speaker to groups on a wide range of senior living issues, estate planning, elder law and financial issues. He is a member of the National Academy of Elder Law Attor...

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