Living a financially-free life in your 60s
October 17, 2006
Congratulations! It’s time to enjoy the fruits of your labor while still making your money work for you.
People think of the 60s onwards as a swinging time — you can choose not to work and opt to play with your grandchild, do 18 holes of golf or be at the mall the whole day. Ideally, you should be able to sit back and enjoy life. However, senior citizens have to face increasing health care costs, and shrinking income.
If you have diligently taken care of your personal finances in your younger years, this may indeed be a time to fully enjoy the rewards of years and years of working. You may just live on the interest income from your investments.
But if you were not able to prepare for your retirement years adequately, you should take steps to ensure that you will still be financially capable to meet your needs.
The tips below will be of help to all senior citizens money-wise.
1. Take stock of what you have so far. How much savings have you managed to keep over the years? List down the amount and in what accounts they are kept in. Take note too of the pension (lump sum or in regular payouts) you may be entitled to receive from the Government Service Insurance System or the Social Security System. Add to that any retirement benefit from your employer or business. See also if you have more non-cash assets than cash. Some elderly couples are "asset-rich" but "cash-poor," e.g., they have lots of assets like real estate properties but very little cash. There should be some cash investment easily available to fund your needs and emergencies.
2. Make a budget. Figure out how much you need per month to cover expenses. These expenditures will be lesser now since most of your major expenses have been dealt with: the home you bought may have been fully paid, and the children are working and earning on their own. The only expense items that may increase at this time are health care and insurance.
3. Stick to your budget. Get only this set amount from the interest income from your investments or from your investment capital or pension. Aim to live within your set budget per month. Some people blow away their retirement pay in a single year, and they are left wondering the next year how they can pay their bills. They may resort to asking money from their children, which could strain family relations, and bruise their own self-esteem. Discipline yourself to follow your budget. If possible, do not withdraw from your investment capital, which could cost you additional fees.
4. Get insurance. Insurance premiums for health care will definitely be at its highest at this time, but if you are healthy and have had insurance for years, you may still be able to get affordable premium rates. Some insurance companies also offer products specifically targeted for senior citizens; these may be worth looking into. The alternative to not having health insurance is to use up your investment capital or rely on the family to pay health costs.
5. Think of retiring only part-time. Some retirees seek work after a few years, complaining of boredom. Working may be good for your wellbeing, with the added benefit earning money too. Find a job that you will enjoy and will not stress you out. Use part of your earnings as addition to your investment capital — in other words, keep on saving!
6. Review your will. Revise accordingly to conform to new tax laws and to respond to changing family circumstances. Make sure that someone you trust, such as your lawyer, has a copy of your will.
7. Protect your capital. With today’s health technologies and medical breakthroughs, it’s possible that you may live for another 20, 30, or even 40 years. It’s essential that you take steps to let your investment capital last that long. Because inflation can erode the purchasing power of your money, place your cash in investment instruments that may give you a yield higher than the average inflation rate. Examples are bonds, bond funds, and other structured products. The risks with these instruments do not outweigh the opportunity to earn you higher income than cash deposits.
8. Re-evaluate your investments to reduce your exposure to risk. You need to reduce your exposure to risk to protect your investment capital. According to The Citibank Guide to Building Personal Wealth, you might want to consider investing more in bonds "if capital protection and income are your primary goals." But if you have built up your wealth and are comfortably living off the interest income from investments, you may want to re-invest most of the returns and have a substantial investment in stocks. Bear in mind, though, that you don’t have many years left ahead to ride out market fluctuations and there is that risk that you won’t be able to recover from losses in the stock market.
9. Do some estate planning. If you have a sizeable asset base, it will be helpful to seek professional help on estate planning. Ask a tax lawyer or a financial institution for ways on how estate and inheritance taxes can be legally reduced. For instance, you may want to donate some of your properties. By estate planning, you can also appoint an executor for your estate, someone you trust who will handle your estate well when you die.
10. Have your financial papers in order. Because of declining health, senior citizens may one day find themselves unable to manage their finances. Keep files and make sure they are easy to find. You may also want to ask your spouse or child to be a co-signatory in some or all of your accounts. This will ensure that hospital bills, for instance, will be met adequately in the future.
With sound money management techniques, you'll get to spend your retirement years without much trouble, enabling you to enjoy the things that really matter. Start being financial-savvy today!
- From the "Take Charge of Your Money" series published on http://business.inq7.net/money/.
[dels]retirement plan, retirement tips, how to save money, wealth management, financial planning, financial plan, financial freedom, citibank, inquirer, philippine daily inquirer, take charge of your money, personal finance[/dels]