Five Budgeting Challenges Facing Seniors
TOPIC #3 There are unique challenges that face seniors when approaching retirement. Often there are significant reductions in income and employee benefits including extended health benefits that need to be managed and planned for.
If you are older than 50, and you haven’t thought about what your finances will look like after retirement, it’s important to do so now. Here are five challenges that seniors face after retirement.
#1 Cost of Living - Do you currently rent or own your home? If you rent, will you be able to afford the rent when you are on a reduced retirement income? The same with your mortgage: if it is not paid off at retirement, can you afford the ongoing payments? If the answer is no, what will you do? Will you need to consider downsizing if you own, or perhaps going into subsidized housing if you rent?
Do you currently have ongoing medical issues? Will your medications be covered by pharma care when you retire? Will you have the options to stay on your employment benefits after you retire or do you need to look into a private plan for yourself.
Planning now for the future will make the transition to retirement less stressful.
#2 Carrying debt - A goal for everyone is to be debt free when they go into retirement. If you are carrying unsecured debt such as credit cards, lines of credit or consolidation loans when you retire, you may struggle to keep up with payments on your now reduced income. This can impact your ability to pay for food, medications and other necessities. This will add more stress into your life and can have a detrimental effect on your health.
If you are carrying debt now, will you be able to afford to have it paid off before retirement? If not, what is your plan? Seek out the advice of a professional if you need to and plan to be debt free before that last day of work.
#3 Little or no savings - Entering retirement with little or no savings is a very big fear for many people who worry they will not have enough to stretch through their lifetime. If you do not have access to equity in a home, it can be even more stressful. Often, we see individuals use credit to sustain their lifestyle rather than ask for help from a professional or family members.
#4 Helping adult children or grandchildren - During your working years it may have been easy or perhaps easier to say “yes” to your family when they found themselves in need of financial assistance. Now that you are retired, how are you going to be able to continue with that help without going into debt? It’s important to only lend or gift money that you can afford to never receive back.
#5 Reduction of income after death of significant other - Seniors who have no assets will face an even tougher time when their spouse or significant other passes away. The household income can be cut in half or even more, but many living costs can stay the same. It is important, even in the face of grief, to consider what steps you can take to reduce your monthly costs and make sure your budget balances. Talk with your significant other to ensure you each have a plan.
The Government of British Columbia has produced a Seniors’ Guide that can be found here at Seniors BC Learn what resources are available for yourself or the senior in your life. Topics include financial matters, housing, home and community care and transportation.
If you or the senior in your life is struggling with debt, there are options and we can help. A Licensed Insolvency Trustee can assess your financial situation and help you deal with your debt. Contact D. Thode & Associates Inc. today for a free consultation. Find the right option for you or your loved one.