Financial Transitions in Later Life

 I recently presented a webinar for financial practitioners called Important Financial Transitions in Later Life. Based on content of my book, Flipping a Switch, “flipped switches” are a metaphor for later life transitions. Below is a brief summary of 11 financial transitions:

Spending Down Retirement Savings- It can be difficult psychologically for “super savers” to spend down accumulated wealth because it feels like a loss. Two good questions to ask yourself are “If you don’t spend your money, who will?” and “What are you waiting for?”

 

Deciding When You Have “Enough”- A good way to determine whether you have saved enough money is to try at least three retirement savings calculators and compare the results.

 

Creating a Retirement “Paycheck”- To create a regular stream of income, options include bond or CD ladders, low-expense annuities, and personalized modifications of the “4% Rule.”

 

Required Minimum Distributions- This is a mandatory “flipped switch.” Make a plan for the use of money that is withdrawn. It can be spent (for living expenses or fun), gifted, or resaved.

 

Later Life Investing- Investors generally get more conservative as they age and guidelines like 100 (or 110,120) minus age are a useful start. Asset classes should be rebalanced regularly.

 

Adjusting to Changed Income- Income changes vs. working years. To adjust to living on less, people can work longer, spend less, move to a less costly home or area, and/or tap home equity.

 

Changed Tax Withholding- Many older adults have multiple streams of income and must make sure that tax withholding/estimated payments are adequate to avoid underwithholding.

 

Becoming a Social Security Beneficiary- Key factors are full retirement age, the annual earnings limit, benefit planning for couples, and a possible higher benefit if you keep working.

 

Health Care Transitions- Older adults have more time for exercise and healthy eating and should earmark a portion of their household budget for out-of-pocket health care expenses.

 

Transitioning to Medicare- A good resource to “get up to speed” is the annually updated Medicare and You handbook. Higher-income beneficiaries need to understand IRMAA, which is the higher monthly Medicare premium that they must pay. There are five tiers of IRMAA.

 

Setting New Financial Goals- Once people get “to retirement,” subsequent financial goals are “through retirement.” Like all SMART goals, they need a projected cost and time deadline.

 

More information about financial transitions in later life can be found in Part 1 of my book.

 

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.