Ron SmithPublished on Never too Late to Plan!
A report from the Government Accounting Office (GAO) in 2019 indicated that 29% of households aged 55 and over have no retirement savings and no defined benefit program or pension. For those with some retirement savings, the median amount of savings at age 65 was only $148,000. Social Security provides most of the income for many households age 65 and older. As a result, good money management is an essential skill in the process of aging well, particularly with our “gift of time.”
Money management skills include being able to construct a realistic budget that not only includes your monthly average expenses and income resources, but also incorporates your retirement plans such as travel, family activities, and charitable contributions. Future medical expenses are a major concern since on average, a couple over the age of 65 should anticipate $300,000 in medical costs over their retirement. Make sure that your budget provides for a six-month emergency fund and annual home maintenance. Ramsey Solutions™ or your local bank can provide you with budgeting tools to help guide you through the budgeting process. Finally, understanding your financial personality, i.e., how you like to use your financial resources is important in developing a realistic financial plan. Will your spending habits support your budget? Are you an impulsive spender or a disciplined spender? Your financial personality needs to be compatible with your financial plan to stay on course.
Retirees need to learn how to shift from a savings or an accumulation mode of thinking to an income or spending plan. he biggest financial fear of most retirees is the fear of running out of money during their retirement.Tapping into available government programs or finding a side gig might help to augment a retirement income if the budget indicates possible shortfalls.Understanding how to best utilize or preserve your resources becomes paramount to your financial planning.
Help from a professional financial planner or from online financial planning tools available from organizations, such as, AARP, the National Council on Aging (NCOA), the National Institute on Aging (NIA), or a local college course may help you better understand the components of a good financial plan. If you want to find a good financial advisor, make sure that you: 1) Ask for referrals; 2) Check industry databases; 3) Make sure that they are a fiduciary; 4) Avoid putting too much trust in titles; and 5) Meet them in person. Most importantly, ask questions and make sure that you understand the advice that is being given.
Managing your retirement also includes planning for some other facets of your life like your housing needs over time and formulating a plan to prepare for those needs when they occur. Even though the planning process appears to be addressing long-term needs, an unexpected change in your health might precipitate an urgent need.Anticipating the possibility of possible bumps in the road will make it easier to adapt to a sudden change should it occur.
Finally, make sure that you have your affairs in order. Many feel that end of life planning is depressing and morbid. Not considering end of life planning transfers the responsibility to your family or friends. Without an understanding of your wishes some of the choices that need to be made can be very difficult for people mourning the loss of a loved one. It can also result in unintended consequences and legal problems with your estate.
The National Institute on Aging recommends the following steps for Getting Your Affairs in Order:
- Put your important papers and copies of legal documents in one place . . . Check each year to see if there’s anything new to add.
- Tell a trusted family member or friend where you put all your important papers . . .If you don’t have a relative or friend you trust, ask a lawyer to help.
- Discuss your end-of-life preferences with your doctor . . . Talking with your doctor can help ensure your wishes are honored . . .
- Give permission in advance for your doctor and lawyer to talk with your caregiver as needed . . .
There are also several legal documents that you should execute. Some of the possible documents include a will or a trust that can formalize your desires regarding the distribution of your assets. Advanced directives, such as, a living will or a durable power of attorney for health care can help define your wishes for a person responsible for your care when you are ill. For legal matters, you may want to execute a general power of attorney or a durable power of attorney. You should work with your attorney to set up the appropriate documents for your needs according to Arizona law and family needs.
Executed advanced directive documents can be registered with the Arizona Secretary of State Office to provide easy access by medical professionals when needed. A trusted member of your family or a friend should also be informed regarding your choices and executed documentation.
Planning is a process. It is not an end in itself. Life is always changing and sometime those changes will affect your plans, but hopefully retirement planning helps to better deal with the realities of life when they occur. Because life is always changing, it is never too late to plan.
National Institute on Aging: https://order.nia.nih.gov/publication/getting-your-affairs-in-order
Ron Smith is an aging-in-place advocate and a Certified Aging-in-Place Specialist (CAPS).
This article appeared under a different title in the September 2021 issue of InMaricopa Magazine.
