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Just about everyone worries about staying healthy, maintaining financial independence, and avoiding falling victim to fraud. But these three big worries are of even greater concern to older Americans.
There are ways to tackle all three, and most come down to making smart financial decisions. Financial independence allows people to cope more easily with every part of their lives.
Key Takeaways
- Maintaining financial independence requires plenty of planning and routine maintenance.
- Staying healthy requires not just Medicare but private health care supplements that fill the gaps.
- Avoiding fraud requires a strong attitude of skepticism about deals that sound too good to be true.
1. Stay Financially Independent
Many older Americans are concerned about outliving their savings, and are seeking ways to ensure that this does not occur. They need to focus on saving and investing options that will produce income that is sufficient to cover their living expenses.
Risk
Retirees may be tempted to put all of their savings into annuities that produce guaranteed rates of return. However, the rate of return they will get is relatively low compared with other more flexible investment options.
Some sales representatives are more interested in meeting sales goals than in matching clients with suitable products. Investors can get locked into inflexible investments and don’t realize it until it’s too late.
For example, suppose you purchase a variable annuity that has a payout option for as long as you live. That sounds great until you are facing an unexpected need for a large amount of cash. If you need to make an early withdrawal or liquidate the annuity, you may be charged a large penalty.
Solution
Make a list of questions to ask before meeting with a financial-service provider and take note of the answers you get. Where possible, ask for the responses in writing.
Conduct thorough research into the product and compare it with other investments.
Information on generic financial products is available at a variety of consumer-oriented websites, including those run by the U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority (FINRA).
Financial institutions often add features and benefits to distinguish their products from those of competitors. Some will have lower fees, higher interest rates, and a waiver of early withdrawal fees. Look for the product that best suits your needs.
Another option is to work with a financial planner to design a portfolio that is balanced and risk-appropriate. Most financial professionals recommend investing conservatively during retirement, but not to the point of losing out on opportunities that can produce more income at an appropriate level of risk.
2. Get Affordable High-Quality Healthcare
The older we get, the more likely we are to need expensive medical care. For Americans of any age, the only solution is to maintain good quality healthcare insuance.
Medicare, which is available to Americans age 65 and older, takes care of many of these expenses, but not all of them. Nobody wants to spend years in a sub-par nursing facility to find that out.
Risk
Paying for private nursing home care during a long illness can quickly wipe out a lifetime of savings. The ability to pay for in-home healthcare, adult day-care, and nursing home expenses, in cash or through Medicare supplementary insurance, largely determines the quality of healthcare people get.
Solution
About 97% of older Americans are signed up for Medicare, and for good reason.
The program provides two types of insurance; hospital insurance for in-patient care and certain follow-up care, and medical insurance coverage for physician services that are not covered under the hospital insurance.
The hospital insurance portion of Medicare (“Part A”) is available at no additional cost, as it is paid for through Social Security taxes during the person’s working years.
The medical portion of the insurance (“Part B”) is available at a premium that can be deducted from your Social Security payments. The cost is adjusted annually and as of 2024 is $240 per month.
Though it has its limitations, Medicare coverage saves most retirees a substantial amount of money.
Supplementing Medicare
About 89% of Medicare fill the gaps in Medicare coverage through supplemental insurance such as Medigap plans. Depending on the plan, the coverage may pay deductibles and a range of other costs not covered by Medicare or in excess of the Medicare limits.
Most also choose to participate in Medicare Part D. This is prescription drug coverage, provided by private insurers.
Retirees may also consider purchasing long-term care (LTC) insurance. This covers expenses incurred from long-term illnesses, and in some plans allows the individual to choose where the care is received.
3. Don’t Fall Victim to Fraud
Everyone is at risk for fraud these days, but older Americans are more often targeted by con artists.
Risk
According to the Federal Bureau of Investigation, older Americans lose about $3 billion every year to fraud.
The North American Securities Administrators Association (NASAA) has dedicated an area of its website to exposing bogus financial services schemes designed to fleece retirees of their life savings. But the losses are usually unrecoverable.
Many of these con artists portray themselves as properly licensed investment professionals. Others pose as contractors for work that is shoddily done or never done, or offer investment opportunities that turn out to be Ponzi schemes.
In perhaps the worst cases, family members or supposed friends take advantage, using a power of attorney to pursue bad investments or even fraudulent transactions.
Fraud Hotline
The National Elder Fraud Hotline number is 1-833-FRAUD-11. This office of the U.S. Justice Department also updates information about the latest frauds targeting older Americans.
Solution
No matter what your age is, the key to battling fraud is to avoid any investment that seems too good to be true. It’s probably not.
Look into the background of an investment professional before agreeing to have that person manage your money. One resource is the NASAA, which hosts a Senior Investor Resource Center dedicated to helping older Americans protect their nest eggs. You can also conduct broker checks on the websites of FINRA and the SEC.
Retirees should check into the background of other service providers, such as contractors for home-improvement projects. This information is usually available on state and county government sites and Better Business Bureau websites.
Ensure that more than one trusted person is kept abreast of financial transactions made on your behalf. For example, a financial advisor or even a family member should be asked to provide regular updates to an independent person, such as an attorney.
Are Annuities a Good Retirement Investment?
An annuity can provide a steady stream of income for a lifetime. That is the point of them.
But anyone considering investing in an annuity needs to do some independent research about the options in advance. Reading the fine print before signing the contract also is crucial.
Some annuities come with steep fees that should be avoided. Many have inflexible terms that heavily fine the accountholder for withdrawing money. Most offer smaller returns than you could get from other investments.
Keep in mind that an annuity ties up a big chunk of your savings for a lifetime. Getting your balance back could be costly.
Will I Automatically Get Medicare When I Reach Age 65?
Yes. Shortly before your 65th birthday, you should receive your Medicare card and information about your coverage. You automatically get Part A (hospital coverage) and Part B (physician services). You can then choose a Part D (prescription drug) plan and supplemental insurance, if you wish .
What Can I Do to Combat Fraud?
The U.S. Justice Department operates a National Elder Fraud Hotline that can be used to report fraud attempts against you or someone you know. The hotline’s website also provides information about current frauds that target older Americans.
The Bottom Line
The desire to maintain independence leads many of us to make decisions on our own instead of seeking assistance. However, there can be good reasons to rely on the advice of family and friends, and on resources provided by government agencies and other unbiased sources.
Making the right decisions and investing wisely can ensure that your nest egg is sufficient to finance your retirement no matter what happens in the future.