Financial Literacy: Learn to Protect and Manage Assets in Retirement
Financial literacy is something that many of us don’t have the time or inclination to acquire. Busy lives and high-pressure careers push other needs to the side and demand our immediate attention, so we put off learning things such as how to manage and protect assets beyond retirement. But understanding how to prepare for retirement and live off investment earnings and a fixed income is valuable acquired knowledge.
If you’ve reached retirement age with little or no idea of how to effectively manage your finances, consider a few tried-and-true tips from financial experts who understand what’s important to you and what it takes to meet your goals.
The right health insurance
First things first: If you’re a senior, it’s important to have a health insurance strategy that works for you. Medicare is a valuable asset, but many seniors proceed from the mistaken assumption that it will cover all their health care needs. Many retirees opt for supplemental coverage like a Medicare Advantage plan, which can provide additional coverage for dental, vision and prescriptions. Without that extra coverage, you might otherwise pay out of pocket. If you are 65 or near the eligible age for Medicare, you’ll need to review vital information about the enrollment period so that you can plan ahead for your health care needs.
Set a budget
It’s difficult to make the most of your money if you don’t know where it goes every month. That’s what makes budgeting such a valuable financial planning tool. A budget ensures you’ll have enough money to pay for what you need, whether it’s bills or unexpected expenses. If, like many people, you’re going into retirement still paying off debt, a budget will make it considerably easier to pay off your debt burden.
Reassess your investment strategy
In recent years, many seniors have put their money into bonds, which have provided a safe means of investment due to lower interest rates and support from the Federal Reserve. However, a changing economic picture may cause bond prices to decline and necessitate a more diversified investment picture when bond prices dip. Meet with a financial advisor to discuss the best ways for you to expand your investment strategy.
Social Security myths
Many people enter retirement expecting to begin drawing from Social Security right away and enjoying the fruits of all that tax money they’ve paid into the system over the years. It’s important to understand that your monthly payouts will be higher the later you enter the Social Security system. So if you have some money set aside for retirement, enough to see you through a few years, it may be worth holding off until age 70 to maximize your Social Security benefit potential. On the flip side, if you’re experiencing chronic health problems, it may be advisable to begin drawing earlier as a way of paying for medical expenses.
Be wary of ‘quick fixes’
There are lots of so-called financial experts looking to take advantage of older adults’ lack of financial savvy. This is an especially dangerous situation for seniors who enter retirement with a sizable nest egg but lack the knowledge of how to grow it. The most unscrupulous individuals are good at confusing with arcane financial terminology that most people wouldn’t understand but which promises huge profits for “minimal” investments. Be on the lookout for such double-talk from an overly friendly voice pushing you to sign on the dotted line right away. If you or a loved one have suspicions about someone who has approached you with an offer that’s too good to be true, contact your local Attorney General’s office right away.
Financial literacy is about devising a strategy that fits your needs and financial objectives. It’s equal parts caution and opportunity: Diversify your investments and be careful about any offers from individuals who make lots of promises, but offer few answers to direct questions.
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