Friends Talk Money

Elder fraud is an epidemic -- Hazel Heckers, victim advocate for the Colorado Bureau of Investigation, discusses the latest types of elder fraud, why people fall for the scams and how older adults can avoid becoming victims. She also tells people in their 50s and 60s what they can do to help protect their parents from elder fraud.

According to industry research, only half of retirees save enough money to maintain their current level of spending for more than five years. Trying to figure out if their income from Social Security and retirement savings will last potentially 30 years or more is one of the biggest sources of stress among those in their 60s and 70s. According to Steve Vernon, author of Don’t Go Broke at Retirement, retirees need to find a middle ground between carelessly spending away their nest eggs and allowing their fears about running out of money keep them from enjoying life. There are two strategies you can use to help ensure that you won’t spend your way into poverty. First, try to delay taking Social Security benefits until age 70 if possible, even if you need to take a part-time job to earn extra income. The longer you wait, the higher the monthly benefits you’ll receive. Second, look for ways to reduce your spending. While going out to eat less often and cutting your cable and cell phone bills can help, the most significant, long-lasting savings come from eliminating major expenses. Getting rid of a vehicle you no longer need or moving into a townhouse or to a state with a lower cost of living can significantly reduce the thousands of dollars per year you spend on repairs, loans, insurance and taxes. Since these decisions can be very complex, consider seeking the advice of an unbiased, fee-only financial planner who can recommend strategies to keep you financially and emotionally secure during your golden years.

According to a recent MetLife survey, 19% of full-time Baby Boomers said they would need to delay retiring because of COVID-19-related financial challenges. However, in the same survey, 12% said that the pandemic had convinced them to retire earlier, citing reasons such as dissatisfaction with their job or “life is too short.”

There’s also a growing movement known as Financial Independence, Retire Early (FIRE). These workers, mostly highly paid Millennials and Generation Zers, are committed to saving and investing as much as possible and paring non-essential spending to the bone so they can retire in their mid-50s or earlier.

Whether you’re hoping to retire in your 50s or plan on working into your 70s, it’s important to evaluate whether you’ll have enough income to last potentially thirty years or more. Start by estimating your life expectancy, which is based on your family history as well as your current physical health and lifestyle habits. Next, consider whether you can delay taking Social Security until age 70, when you’ll earn the maximum benefits. Then calculate how much your 401(k) plan and IRA accounts will be worth at your desired retirement age and estimate how much of an income hit you might take if a bear market drives down the value of your retirement assets by 25% or more when you first start making withdrawals.

If there’s a strong possibility that you won’t have enough income from Social Security and your savings, consider whether it makes sense to invest some of your nest egg in an annuity that will provide guaranteed income for life or if you may need to delay retiring or take on a part-time job after you’ve stop working full-time.

These are complex issues and the cost of making the wrong choices today could threaten your future financial security. To give you greater peace of mind, consider seeking the advice of a fee-only fiduciary financial planner. These professionals can objectively analyze your current and future spending and income sources, your outstanding debts, and the size and holdings in your retirement accounts to provide a realistic assessment of how likely you are to achieve your retirement goals and what you can do to improve your chances.

Most retirees want to live independently as long as possible. But it’s important to have realistic expectations of what you’ll be able to do on your own as you grow older. According to a University of Michigan survey of 8,000 seniors, 31% of respondents between the ages of 80-89 said they could live independently. That number dropped to just 4% for those over 90. If you’re hoping to live independently by staying in your home—or moving to a condo or townhouse in a retirement community—you’ll need to think about how you may eventually need to adapt your dwelling to accommodate physical limitations that naturally occur as you age. Fortunately, there are plenty of companies that specialize in installing stairlifts and making bedrooms and bathrooms wheelchair accessible. Mobile devices and smart-home technologies make it easier to get immediate help if an emergency occurs. If you’re living on your own, it’s also important to develop and maintain a multi-tiered social network of people who can help you—and whom you can help in return. Family, friends, neighbors and members of your house of worship can all play different roles in this network. Try also to build strong, mutually beneficial relationships with one or two younger people who are willing to help you during emergency situations. And make sure to formally designate people you trust to serve as your financial and healthcare proxies if and when you’re no longer able to make these critical decisions on your own.

The easing of the COVD-19 pandemic, increased consumer spending, supply shortages and continued government stimulus have resulted in the highest inflation rate since 1992. People are feeling its effects at the gas pump, at the supermarket, at car dealerships, at building supply companies and when they make hotel and airline reservations. But will inflation continue indefinitely, or even rise to the record levels of the early 1980s? Most economics believe it won’t. They predict that inflation will level off after consumers get their pent-up spending out of their systems, supply chain issues are resolved and pandemic-related stimulus spending eases. The Federal Reserve is keeping a close eye on inflation and is likely to increase interest rates and tighten the money supply if it sees inflation rising much beyond its target 2% annual rate.

While inflation does affect consumers’ pocketbooks, it’s important to remember that it’s a symptom of a recovering economy and that the inflation rates you see quoted in the news are year-over-year rates. This means that inflation today is being compared to the same period in 2020, when lockdowns and millions of lost jobs depressed consumer spending. Still, if you’re worried how inflation and rising interest rates could affect your financial security during retirement you may want to see how different rates could affect your current financial and investment plan. When interest rates rise, prices of existing bonds will fall, which means you may want to avoid buying long-term bonds or CDs. You may also want to increase your stock holdings, since, historically, stocks have outperformed inflation by a wide margin. If your mortgage rate is high, you may want to reconsider refinancing at today’s low rates even if this extend your payoff period by a decade or more. If you don’t feel comfortable making these important decisions on your own, consider working with a fee-only fiduciary investment adviser. They can stress-test your entire financial picture against various inflation scenarios and suggest actions you may want to take to reduce its potential impact.