Seniors should check finances upon nearing retirement age
Trying to predict one’s finances after becoming a senior can be an interesting exercise, and certainly isn’t a one-size-fits-all formula. The following compilations from the U.S. Bureau of Labor Statistics provide some telling indicators:
• The largest expense for the average senior is the same as someone under 65 is housing.
• The average American between 65 and 75 years old spends $22,216 annually on housing. Upon reaching age 75, that figure dips to an average of $20,300.
• Transportation is among the higher expenses for seniors. While a senior 65 to 75 averages spends $10,899 annually, that figure drops significantly for those 75 and older to $6,448.
• Health care is one area where expenses rise with age. Those between 65 and 75 pay an average of $7,942 each year. Americans over age 75 spend a slight bit more at $8,145.
For some advice on items to consider as retirement looms, Tom Stanton, market manager in Solon and Twinsburg at Middlefield Bank, shared some of his expertise.
“The cornerstone of financial wellness in retirement is proactive budgeting,” Stanton said. “Experts recommend that seniors reassess their budgets annually to reflect changes in fixed and variable expenses, including housing, utilities and health care premiums.
“Tools like budgeting apps can help track spending and identify areas for savings. Maintaining an emergency fund – ideally three to six months of living expenses – is also essential to cushion against unexpected costs.
“Additionally, maximizing retirement income is critical. Seniors should review their Social Security claiming strategies, ensure they’re taking required minimum distributions from retirement accounts if over age 73, and evaluate investment portfolios for consistent, low-risk returns.”
Stanton stressed that seniors keep a close look at the health care factor.
“Health care is often the largest and most unpredictable expense in retirement,” Stanton said. “Seniors are encouraged to review their Medicare plans annually to ensure they meet current needs. Supplemental insurance, such as Medigap or Medicare Advantage, can help cover gaps in coverage.
“Long-term care insurance is another consideration. These policies can offset the high costs of assisted living or nursing home care, expenses not typically covered by Medicare. Planning for these costs early can prevent financial strain later in life.”
Stanton advised that seniors-to-be start their financial planning significantly before retirement.
“Many financial advisers suggest that seniors begin making longer-term adjustments around age 60,” Stanton said. “This is a pivotal time to reduce debt, downsize if necessary, and shift investment strategies toward lower-risk options.
“It’s also a good time to update estate plans and ensure all legal documents – like wills and health care directives – are in order.”
With regard to investments, Stanton suggested keeping an eye on the following:
“Be aware of any red flags including advisers who promise unusually high returns, pressure clients into quick decisions, or lack transparency about fees,” he said. “Seniors should be wary of anyone who discourages them from involving family members or other trusted individuals in financial discussions.”
Steve Mark is a freelance journalist.