Excerpted and updated from “For Seniors: Tips for Protecting Your Finances” and “How Older Adults Can Steer Clear of Scam Artists,” Summer 2013.
No matter how old or young you are, there are some basic things you can do to better manage your finances. Here are banking and other money-management tips for seniors to consider for their retirement years.
Decide if you need financial help from an expert, and then choose wisely. A financial advisor could help answer questions such as how quickly to take money from savings and how to invest in your later years. But before you follow the advice of a supposed “expert” who claims to have special credentials for advising seniors, research what that title means and the advisor’s background. To learn more about professional designations and for tips on choosing an investment advisor, visit the Financial Industry Regulatory Authority website.
Prepare for the possibility that you may become unable to handle your finances. Consider writing down a list of your financial institutions and account numbers and keeping it in a safe place that would be accessible by your loved ones in an emergency. An attorney can help you decide if you should have a legal document known as a power of attorney, which would allow one or more people you designate to make key decisions with as much or as little of your financial or personal life as you choose. You can also add a co-owner to a deposit account, but that person has the ability to conduct transactions, including withdrawing money from a checking or savings account, without your prior approval. Your banker or attorney may be able to help you identify other possible alternatives, but you still must think carefully about to whom you give access to your money.
Develop a spending plan for your retirement. Having a plan for your money and limiting expenses in retirement is important. Think about new ways to cut costs, such as by letting your auto insurer know you no longer drive your car to work. Consider continuing to put some of your income into savings, especially for short-term goals such as holiday gifts, because that can help you avoid a large, sudden withdrawal from your retirement investments. Also see [1997] Retirement Planning and Saving: Mistakes to Avoid.
Remember that a reverse mortgage will eventually have to be paid back, with interest. Reverse mortgages allow homeowners age 62 or older to borrow against the equity in their homes without having to make monthly payments as long as they meet the terms of their loan agreement, such as staying current on property taxes. However, the money borrowed plus interest must eventually be repaid, usually when you or your heirs sell the house.
Organize and protect your important documents. . Items to keep at home, in a secure place that’s easy for you to get to, may include your bank and brokerage statements, insurance policies, Social Security and company pension records and other personal and financial papers you or your family might need on short notice. If caregivers or others regularly visit you, make sure that your checkbooks, credit cards and other financial records are protected. For additional suggestions, see [2018] Safe Deposit Boxes, Home Safes and Your Valuables and [2006] Fires, Floods and Other Misfortunes: Are You Prepared Financially.
Steer clear of scam artists. Anyone can be a victim of financial fraud, but older adults are particularly at risk. Those who commit elder fraud range from loved ones — family members, friends or caregivers — to complete strangers. To protect yourself or someone else:
- Remember the red flags of a fraud. These include an unsolicited phone call, email or other request that you pay a large amount of money before receiving the promised goods or services; an offer that seems too good to be true, like an investment “guaranteeing” a return that’s way above the competition; and pressure to send money quickly. Also be wary when someone expresses a new or unusual interest in your finances.
- Protect your personal information. Never provide Social Security numbers, bank account information, PINs, passwords and other sensitive information in response to an unsolicited call, fax, letter, email or text message, no matter how genuine the situation may appear.
- Look at your credit card bills and bank statements as soon as they arrive and report unauthorized purchases, withdrawals or anything suspicious, regardless of how small or large.
Many people also make the mistake of not telling loved ones or not contacting the police or other law enforcement agencies when they’ve been victimized. Perhaps some are embarrassed to admit that they were “misled” and lost money. Others have fears of losing their independence. As difficult as this may be, reporting the incident is the only opportunity you have to recover some or all of your loss.