5 Ways to Improve Financial Security as You Get Older
CHICAGO, January 23, 2023 (Newswire.com) - iQuanti: Older adults run into new financial challenges. The kids go to college, retirement approaches, healthcare costs become a more pressing concern, and investment goals change. Consequently, your plans and financial to-do list must evolve to address these changes. Taking the right steps can help you smooth out your finances as you move through life. With that in mind, this article will dive into five ways to improve your financial security as you age.
1. Contribute more to your retirement accounts
Retirement accounts offer tax advantages, such as tax deductions or tax-free income. As you get older and earn more, increasing your retirement contributions may be a wise choice. In fact, contribution limits increase for people 50 and over so they can make "catch-up" contributions. That means you can save even more for retirement in the last decade and a half of your career.
2. Get a life insurance policy
According to LIMRA, 68% of households with life insurance say they would feel financially secure if their primary wage earner passed away unexpectedly. Less than half of uninsured households in that study said the same.
Even if all your kids are out of the house, one partner passing away could burden the surviving partner. The life insurance death benefit could prevent this by helping the surviving partner replace the policyholder's income and pay off their debts. With that in mind, here are some policies to consider:
Whole life insurance with no medical exam
Whole life policies offer lifelong coverage, giving you peace of mind. Luckily, some insurers offer whole life insurance with no medical exam as well. That way, you can get coverage faster without the inconvenience of an exam.
A whole life policy also includes a savings element through the cash value component. Once this cash value grows large enough, you can withdraw from or borrow against it, supplementing your retirement income. If you surrender your policy, you can receive the cash value minus surrender charges.
Guaranteed issue life insurance
Guaranteed issue life insurance is a small permanent life policy that guarantees approval. Death benefits are small, but premiums are inexpensive, and you can also build cash value. Guaranteed issue life insurance also has a one to two-year lockout period. This means your beneficiaries may only receive a premium refund if you pass away during the lockout.
Simplified issue life insurance
Simplified issue life insurance sits in the middle of traditional whole life and guaranteed issue life insurance because approval isn't guaranteed, but it's highly likely. Premium and death benefits amounts are often in between traditional whole life and guaranteed issue life insurance policies. These policies also have cash value.
3. Establish your estate plan
Estate plans spell out your wishes for your end-of-life medical care, how your assets are distributed, and more. So, it's essential to establish an estate plan if you don't yet have one. Here are some key documents to prepare:
- Will: This lays out how you would like assets to be distributed.
- Durable Power of Attorney: This names a trusted individual to handle financial decisions if you become incapacitated. For example, the individual named in this document would have access to your bank accounts and be able to file your tax returns.
- Medical Power of Attorney: This names someone to make medical decisions on your behalf if you become incapacitated.
- Advanced Health Care Directives: These documents, also called living wills, state your wishes for end-of-life medical decisions.
If you already have an estate plan, evaluate it every time a major life event — like retiring or selling a home — happens. Regardless of life events, it is wise to review it every few years as well. Also, consider working with an estate planning lawyer. They can help ensure everything is worded correctly and help you avoid forgetting key pieces of your estate plan.
4. Boost your emergency fund
Emergency funds are savings accounts for emergencies, like car accidents or unexpected medical bills. They provide the funds to pay for the emergency and cover any living expenses if you can't work while handling the emergency.
Many experts recommend saving three to six months of living expenses in your emergency fund. However, adding a few extra months can make you feel more at ease as you approach retirement — even if you have significant retirement savings. That's because your savings account is safe, thanks to FDIC insurance, and not subject to market fluctuations. It's also more liquid than your investments, so you can access it without having to sell investments. Your investments should serve more as your "income" in retirement, whereas your emergency fund is for those unexpected events.
5. Find new sources of income
Retirement savings and other investments may fund a substantial portion of your retirement. However, finding additional income sources can reduce your reliance on any particular asset and reduce the need to draw down on your investments.
For example, you may use skills acquired over your career to freelance or consult part-time on the side. Before retirement, this can help you save more in your accounts. After retirement, you can build this work around your schedule to supplement your assets without sacrificing your desired lifestyle.
Increase your financial security
As you get older, start improving your financial security by upping your retirement contributions. You should also consider a life insurance policy to protect your spouse and supplement your retirement wealth. That policy may play a vital role in your estate plan, but make sure to create the other documents like your will, durable and medical powers of attorney, and advanced health care directives.
With these important steps taken care of, you may want to add more to your emergency fund and seek out new income sources to supplement your retirement assets. Starting on these steps today will maximize your financial security and give you peace of mind as you age.