The silver tsunami continues to roll across the country as American Baby Boomers retire in record numbers. Since 2010, 2.2 million boomers have left the workforce each year — that’s roughly 5,900 each day. Even though they’re no longer participating in the 9-5 rate race, these retiring boomers need a solid financial strategy to continue living well. As healthcare improves, seniors are living longer, which sometimes means they outlive their savings. Add to that the rising costs of housing and healthcare, it’s not surprising that many seniors end up living in poverty. According to the National Council on Aging (NCOA), “[o]ver 25 million Americans aged 60+ are economically insecure — living at or below… $29,425 per year for a single person.” With this in mind, it’s vital that retiring seniors put a financial action plan in place and stick to it.
Budgeting Tips for Seniors
Setting and sticking to a monthly budget is the first step every retiring senior should take. Fidelity Investments — one of the largest financial services companies in the country — recommends seniors split their budget into two categories. The first is essential expenses and include things like healthcare, housing, transportation, and food. Fidelity recommends matching these essential expenses to your guaranteed income sources like Social Security, pensions, and annuities.
The next budgeting category is discretionary spending, which includes things like travel, entertainment, dining out, and gifting. Seniors cover these costs with the withdrawals they make from retirement accounts. According to Fidelity, you should limit withdrawals to 4-5% in your first year of retirement and then adjust for inflation after that. Creating a retirement budget early will help you kick off your golden years right.
When Should Seniors Refinance?
A growing number of seniors are entering retirement with homes they don’t own outright. A recent survey by a national mortgage lender found that “44 percent of Americans between the ages of 60 and 70 have a mortgage when they retire, and as many as 17 percent of those surveyed say they may never pay it off.” When you retire with a mortgage, however, those payments take a big bite out of your monthly budget. That might lead some seniors to wonder if it’s worth refinancing their mortgage to save a little money. Mortgagecalculator.org offers a few factors to consider before refinancing.
Signs it’s time to refinance:
- One of the best times to refinance is when you can reduce your interest rate. You’ll end up saving tens of thousands of dollars over the life of a loan. However, the math only works out if you can reduce your rate by a full point or two. A drop of half a point or less could take you years to recoup.
- Another good reason for seniors to refinance is to switch from an adjustable-rate mortgage or eliminate a second mortgage. This often equals significant savings.
- Seniors can also refinance to pay off a home faster. Switching from a 30-year mortgage to a 15-year mortgage might cost more per month, but you’ll eliminate your mortgage payment that much sooner.
Of course, refinancing isn’t always a good idea. These loans come with closing costs, and sometimes the savings you realize doesn’t make up for the added expense. You can use this mortgage calculator to see if refinancing makes sense in your situation.
Retiring with Credit Card Debt
Credit card debt is another growing financial challenge for seniors. According to Yahoo Finance, “[i]n 2016, 42 percent of households headed by someone 65 to 74 years old reported credit card debt, a 10 percent increase from 1992.” The average amount seniors owed also increased during this period. For many seniors, credit cards are one way to help ends meet during retirement. But monthly debt payments eat away at a senior’s already limited budget.
To help manage credit card debt, experts recommend seniors prioritize payments. If you have revolving debt on multiple cards, seniors can pay off the balance with the highest rate, which saves interest costs. Another strategy is to pay off your card with the lowest debt, and then include that previous debt payment with another current debt payment. This approach can help you pay off debt faster. If you begin facing financial trouble, it’s best not to avoid these debts because late fees and penalties only make things worse. Instead, try reaching out to the card company to negotiate a lower payment.
One thing’s for sure: retiring seniors who enter their golden years with a plan live more comfortable lives than those who don’t. And when it comes to retirement, isn’t comfort what it’s all about?
About Generations Home Care
Generations Home Care personalized in-home care and support services help those recovering from illness, injury, or surgery, living with a chronic disease, or dealing with the natural process of aging. We help people live a fuller, healthier, and independent life.
We offer levels of care ranging from companionship, to respite for the primary family caregiver, to homemaking services, to assistance with activities of daily living, to Alzheimer’s and dementia care. Generations Home Care takes a holistic approach and emphasizes a consistent, client-centered plan of care.
Our Specialty Services Include:
- Rehab or hospital-to-home programs for safe discharge.
- Short-term post-operative care during recovery periods.
- Non-medical life management services for people with chronic conditions.
- Veteran’s connection to care program.
- Live-in services and couples care.
If you’d like to learn more about how we can help you, contact us today at 602-595-HOME (4663) or by filling out the contact form on our website.