Financial planning during the young adult years typically focuses on saving for a house and raising a family. Ideally, it would also include saving for retirement. If you were able to do that sooner rather than later, good for you! If not, don’t worry, it’s never too late to plan and saving for retirement. Creating wealth intended for funding senior living expenses is one of the best ways to rest assured you have the money needed when paychecks stop arriving.
Follow these tips for funding senior living expenses:
Tip #1 –Know how much money you will need. Determining a figure for funding senior living costs may seem impossible, but AARP’s Retirement Calculator: Are You Saving Enough? can help. There are many angles to examine including anticipated retirement age, investments, savings and when to start receiving Social Security.
You’ll also want to consider funding senior living in the long-term (i.e. long-term care). Again, there is no crystal ball, but there are ways to get a handle on long-term care costs now, so they aren’t a burden on you or your family later.
For example, long-term care insurance is the most obvious, and it can be fairly affordable even into your 50’s and 60’s if you remain healthy. Another option is buying a whole life insurance policy that offers a variety of options for funding senior living, when the death benefit is no longer needed. Learn more from our How Insurance for Senior Living Can Help With Costs.
Tip #2 – Don’t let debt pile up. Nothing can drain your finances like debt that accrues interest and eventually becomes unmanageable. Try to payoff credit cards, mortgages, car loans and other loans as soon as possible, preferably while you’re still working. Paying one extra mortgage or loan payment each year can speed up the payoff date, saving you money and increasing your credit score. For more options check, read CNN’s How to Pay Off Your Mortgage Early to Save on Interest and Reduce Your Debt.
Tip #3 – Maintain your health. Going to the doctor may not be something you like to do, but having a primary care physician and having routine check-ups can go a long way toward funding senior living. Visiting a PCP regularly for preventative care can help reduce your risk of developing a health emergency and prevent chronic conditions (e.g. diabetes, high blood pressure) from becoming worse. Discover how your primary care physician can be your health care quarterback from Howard County General Hospital.
Overlooking your health can effect you physically and financially. According to the Consumer Financial Protection Bureau’s Medical Debt Burden in the United States, medical debt is the most common debt reported on credit reports, which can lower credit scores, increase interest on borrowing rates, make it difficult to get hired and result in bankruptcy.
Tip #4 – Maximize retirement savings accounts. If you’re not contributing the maximum amount to your 401(k), 403(b) or other retirement saving account consider doing so sooner than later. Plus, your employer may offer matching, which adds more money to your savings for funding senior living.
If you’re over 50, it’s possible to make annual “catch-up contributions” if you lagged behind at the start. This is a great advantage. The annual allowed catch-up contribution is $6,500, up from $6,000 in 2015. Learn more from the Internal Revenue Services’ Retirement Topics – Catch-Up Contributions.
Tip #5 – Automate savings. If you’ve set up automatic bill paying, did you also automate deposits to your savings account? Designating a specific dollar amount be transferred from your checking into your savings account every two weeks or month can make saving less painful. If your employer offers credit union membership benefits, you can typically set up payroll deduction through the credit union or your employer to have a designated amount deducted from your paycheck and deposited into your savings account. Over time, your deposits add up while earning interest, which will help with funding senior living or a financial emergency. For more details, read Forbes’How To Automate Your Savings.
Funding senior living should be a part of your financial planning. Estimating the amount you’ll need, reducing your debt while at the same time building up your savings, will put you in a better position to live a retirement you want – a relaxing, enjoyable worry-free retirement.