Unique financial challenges for older adults
August 21st is National Senior Citizens Day! The day is dedicated to raising awareness about issues ageing adults face. Barry Bigelow shares the unique financial challenges older adults face when planning for the future.
First, it’s good to know who we are celebrating! Minnesotans 62 and older are considered senior citizens. Now, that may sting for people who are 62 years young, but we believe it’s a badge of honor and such an exciting time for older adults. Many people believe aging is a bad thing and that retirement is an end, but it’s actually an awesome beginning! You’ve worked for 40+ years and saved, and now it’s finally time to enjoy your newfound time and hard-earned money. We can celebrate them today by taking the time to make sure those nearing 62 and those 62 and older are prepared for the major financial decisions ahead of them.
It’s not so much about when people should retire, but when do people desire to retire? Think about if you are able to live the life you want with the savings you have at age 62. If you can and have the desire to pursue the next chapter of your life, do it! If you’re not ready to leave the workforce or feel the need to save a little more, don’t retire before you are mentally and financially ready to do so.
People often think 62 is the prime age to retire because that is when you can start claiming your Social Security benefits. However, claiming your Social Security benefits at 62 can permanently reduce your benefit. You can wait until your full retirement age of 66 or 67, based on the year you were born, to receive your full benefit. And if you can make it to age 70 before claiming your Social Security benefit, your benefit will have grown by 8% each year you wait to claim.
Social Security is just one part of your overall income plan for retirement. It’s important to have an overall income strategy designed to support the lifestyle you want in retirement. You may want to travel a lot right when you retire. We can assess your investments and outline a strategy that allows you to do the things you want in retirement while remaining financially conscious of taxes and additional expenses later in retirement, like healthcare and long-term care.
People often forget to plan for the gap between retirement and Medicare. Many people want to retire at age 62 when Social Security benefits kick in, but retirees aren’t eligible for Medicare until age 65. To bridge the gap, retirees might be eligible for retiree health care coverage through their former employer as a continuation of their coverage. Otherwise, you can use your spouse’s insurance if they aren’t retired yet, or you can purchase a plan through the Affordable Care Act. The key is to have a plan in place until Medicare begins in order to avoid having a healthcare emergency without coverage.
Many people want to retire, but they don’t have a plan for the 40 hours a week they get back when they stop working. Those nearing retirement may choose to keep working to help stay engaged and connected with their community. Before you make the leap into retirement, think about how you will spend your days. Are there opportunities to utilize your gifts and talents through volunteering or helping take care of your grandchildren?