Find Out What Retirees’ Top 6 Financial Concerns in Old Age Are

November 19, 2019 Author: Tess Downing, MBA, CFP®, Complete View Financial

Complete View Financial

As we continue to watch the U.S. population age, starting with the earliest Boomers who are now nearing their mid-70s, retirement is playing out a lot differently from how it did in past generations. The differences begin with their better health and more active lifestyles and move through all the financial implications of longer life expectancy. The question is: what’s keeping people up at night as they think about getting old? Their financial concerns in old age are the culprit.

The Nielsen Company has provided us with answers by conducting a survey of over 30,000 respondents worldwide. It didn’t give us statistics on how many people lived where or who had what in retirement. Instead, it identified the top six concerns as people looked forward to life in ‘old age.’

Of those top six concerns, three could be called ‘physical,’ and over 50% of respondents mentioned them. They included:

  • losing self-reliance to care for basic needs,
  • losing physical agility and
  • losing mental agility.

While those are not the focus of our exploration, they will all play a role in the next grouping: financial concerns in old age.

The other three top concerns focused on:

  • becoming a burden on family members or friends,
  • having enough money to live comfortably and
  • having enough money to cover medical costs.

Let’s look at each of these.

Becoming a burden on family members or friends

The financial issue: Here’s where the three physical concerns come into play. As soon as you can’t be self-reliant – or you lose physical or mental agility – you’ll likely first turn to family and friends for help. As your condition develops, what starts with assistance with basic daily needs may evolve along a continuum of types of care. You may go from family and friends to professional help, and from home to assisted living and skilled nursing facilities.

The physical, emotional, and financial costs to caretakers in the early stages can be high. And once professional care is needed, the money you had planned to spend in retirement may have to be redirected to pay for your care. Or maybe investment assets will have to be sold, as Medicare doesn’t cover these expenses.

The financial solution: If you’re in your pre-retirement years, it’s time to be sure you have factored some form of long-term care coverage into your retirement planning. On the other hand, if you’re already retired, consulting a good planner can help you rearrange your investment assets to create that protection.

Having enough money to live comfortably

The financial issue: The Nielsen survey showed that 38% of North Americans believe they won’t have the financial resources their parents enjoyed in retirement. Their financial concerns in old age are keeping them from living the life they dreamed of.

What’s more, most people underestimate what it will cost to live in retirement. One assumption is that life will cost far less once they cut out all the expenses of working. However, all too often the savings are less than expected, inflation calculations are incorrect and new expenses crop up. For example, you might have uncovered medical costs, or you might have to pay for tasks you once did yourself.

The financial solution: Retirement is funded basically through two vehicles: lifetime income such as Social Security and income-generating assets (along with savings). If you are pre-retirement and haven’t taken your Social Security benefits, certain strategies can maximize the amount of the first Social Security check, which will dictate what you will receive for the rest of your life. And whether you are pre-retirement or retired, a review of income-generating assets could identify more effective strategies.

Having enough money to cover medical costs

The financial issue: Basic Medicare only covers about 80% of costs for hospitals and doctors, so how you cover the remaining 20% becomes vital. Will you go for Medicare Advantage or Medicare Supplement? And which plan?

When you choose a Medicare plan as you turn 65, it ‘s easy to be swayed by the advertised explanations of the different players in the system. However, the devil is truly in the details.

Many decide based on the monthly premium. However, what is not covered (that is, deductibles, copays and other out-of-pocket expenses) can turn a poor decision into years of unexpected costs.

And, unknown to many, only your first decision – when you first sign up for Medicare – is free from an underwriting process that considers pre-conditions. After that, any change could be restricted by your medical history at that point.

The financial solution: A planner who understands the intricacies of the Medicare alternatives can help you make a decision that won’t drain your retirement resources when you start using your insurance. And if you’re already past 65, you may still benefit from expertise to transition you to a safer policy that factors in the experience you’ve had to date using the system.

Overall, the only thing you can do about the three ‘physical’ concerns about life in old age is to take the best possible care of your health and your body. However, the three ‘financial’ concerns can be avoided by careful, expert planning. If you’d like help in achieving that, we’re ready to help.