By Angela Lindsay
The concept of saving those pennies for a rainy day, which we were taught to do as children, may come in handy as we start thinking about our retirement years. However, for many seniors, money problems are already an unfortunate reality.
A Washington Post article concerning a report from the Consumer Financial Protection Bureau (CFPB) found several common financial struggles faced by people over 60. One such issue is seniors carrying a lot of more debt, which can come in the form of helping out children and grandchildren, while others may still be paying off their mortgages or student loans, according to the CFPB. Marsha Barnes, a personal
finance expert and founder of The Finance Bar, agrees that seniors assisting their adult children financially creates a challenge, as does lingering debt.
“While golden years should include walking into a somewhat debt-free lifestyle, more seniors are faced with working beyond retirement age to tackle financial obligations,” she says.
Barnes also cites increased cost of living as a common problem. The CFPB says that seniors may face complications with reverse mortgages, which are loans that allow homeowners to tap into the equity and delay repayments until they die or sell the house. Homeowners are generally still required to pay the property taxes and homeowner’s insurance. People who fall behind on those payments may be at risk of facing foreclosure and losing their homes. Complicating matters is the fact that seniors are often targets of scams or identity theft, which can be difficult to recover from, according to the report. It also found that seniors frequently filed complaints if they had a hard time correcting errors on their credit reports or disputing unauthorized purchases on their credit cards.
In that vein, there is also confusion over banking products and fees for seniors. Many of the complaints filed by older consumers were related to confusing charges on their bank and credit card statements, according to the CFPB, and sometimes consumers spotted suspicious subscriptions or services that they didn’t recall signing up, for or had a hard time understanding how interest charges worked on their credit cards.
Barnes adds that the uncertainty of legislative changes can pose a problem, as well, for those who will depend on Social Security and Medicare or Medicaid to supplement their income and health insurance.
“There are growing concerns of what this will look like in the near future,” she says.
Then, there are the challenges seniors may face with managing finances after the death of a spouse. Many of the older consumers filing complaints with the CFPB said they had difficulty gaining access to certain assets, such as savings accounts, even after providing the necessary documents. According to the report, some people who had taken out reverse mortgages had trouble staying in their homes if the agreement was in the deceased spouse’s name. Early planning is key, and one of the best ways to ward off many common financial pitfalls in retirement years.
Says Barnes, “Not being aware of how to plan for retirement creates financial challenges for seniors. In our 40s, 50s and 60s, as consumers and employees, there aren’t many conversations being had around what life looks like when we decide to stop working; therefore, when this time comes, we are not prepared.”
As seniors begin to move toward retirement, it will become increasingly important to consider how to make their retirement income last for an additional 30 years or more, and how this will be driven based on the cost of inflation, she adds. Her suggestions include building up an emergency savings account with six to 12 months of living expenses:
“While this may appear to be a huge undertaking, it is necessary to plan for the income that you may be losing well in advance.”
Creating a detailed list of all current debt and the amounts owed, and beginning to make strides toward paying off this amount while avoiding accruing additional debt, are also crucial steps she says:
“Take time to create a retirement budget that outlines what expenses you will have at retirement, where you would like to live and how much money you’ll need each month to still engage in experiences that you enjoy. Retirement should be about exploring life in ways that you may not have been able to partake before.”