9 Financial Planning Keys to Aging at Home for Retirees
Written by
Jordan Rosenfeld
Edited by
Gary Dudak
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Many retirees dream of retiring in their homes, a concept known as “aging in place.” This ideal scenario means that you would spend your final days in the comfort of your home and not in a retirement home, hospital or assisted living facility.
While some health aspects are out of retiree’s control, you can financially prepare for this ultimate goal so you at least have the money to pay for whatever it is you might need.
Here are some key considerations to set up your finances if you are a retiree who plans to age in place.
Buy Long-Term Care Insurance
Other than housing costs, the biggest expenses in retirement are often healthcare costs.
“One piece of planning is to consider a long-term care insurance policy,” said Eric Mangold, founder of Argosy Wealth Management. “Many believe that these policies can only help if you are in a healthcare facility, but some of these policies can also provide for certain types of care at home.” This may include nursing, physical therapy, hospice care, etc.
“Since many folks would prefer to stay in their home for care, some of these long term care policies can help you do that,” he added.
Maximize Your Retirement Accounts
Putting money away into tax-advantaged accounts like 401(k)s and IRAs retirement accounts is a great start, but you need to do more than that if you hope to have the money to pay for the needs of aging in place, according to David Brilliant, estate planning attorney and owner of Brilliant Law.
You need to maximize those accounts, putting away the maximum allowed. “The tax savings provide substantial benefits over the long run,” he said.
Downsize or Relocate
A too-big house, or one that doesn’t take into account changing bodies and health can be an impingement to aging in place.
“For housing, downsizing or relocating to a lower-cost area can free up equity to fund retirement. If staying put, ensure the home is suited for aging in place,” Brilliant said.
Live Below Your Means
Beyond your accounts and insurance, mindset matters. Brilliant said, “I coach clients to live below their means and be content with experiences over lavish spending. Developing strong social connections, pursuing hobbies and charitable work create purpose.”
Scrutinize Everyday Spending
Budgeting is key to long-term planning, according to Martin Lynch, president of the Financial Counseling Association of America (FCAA). “Create an accurate, detailed budget and scrutinize your everyday spending. Are there areas where you could make modest adjustments without impacting your lifestyle?”
He recommended the FCAA’s Debt Freedom Tool, a budgeting calculator that helps people determine how much they are spending and provides a copy of their budget and suggestions for debt relief that is specific to their situation.
Catch Small Recurring Costs
Lynch encouraged reviewing costs like recurring subscriptions that renew automatically, or tracking those you have to renew manually. He shared the example of his own grandmother who would renew her magazines and other subscriptions well in advance of their renewal dates.
“She would pay them, but then not remember and pay them again when her annual subscription renewal came in the mail. By the time we realized it, she had paid for 7-plus years of magazines in advance,” he said.
Improve Your Credit Standing
Better credit can lead to better loan terms on purchases, Lynch pointed out, so improving your credit standing is a good plan now and into the future. “What might be your next credit purchases? For example, if you’d like to replace your car soon, hold off on that purchase until you also improve your credit score and qualify for a better interest rate. “
Consider a Reverse Mortgage
While advertisements make reverse mortgages seem like a scam, they’re actually a great product, according to Lynch. He said, “If managed properly, the line of credit option can pay you hundreds of dollars every month, tax-free, that you won’t have to repay if you’re going to stay in your home.”
Consolidate Debt
If you hold a lot of debt, particularly the high-interest kind, consider a debt management plan. Work with a credit counseling agency to create a debt management plan that works with your creditors.
“This makes payments affordable for their clients,” Lynch explained. “They also help them create a manageable budget and provide financial education. And, debt management plans are much safer than debt settlement.”
While the unknowns of aging can be frightening, financial security in retirement can allow you to remain at home with all the comforts and care you can afford — and you can do it with some smart planning now.
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