Financial Planning for Seniors - Tips, Tricks, and More

A financial advisor helping someone through steps of financial planning for seniors, looking at paperwork.

With approximately two-thirds of American adults in their 40s having less than $100,000 saved up for retirement, planning for the future and retirement is crucial. Even more alarmingly, half of the people in their 50s have less than $100,000 saved while 28% of those in their 60s have less than $50,000 saved up. These patterns show the critical nature of financial planning for seniors.

While most people are looking to retire in their mid-60s, they will need to have enough of a nest egg for this to be a sound financial decision (generally, the earlier you begin saving and investing the better off you will be).

To enjoy your golden years without stress, you need to be stable financially. Doing so takes some energy and planning. If you are in your 40s or 50s and taking care of aging parents, or are a Baby Boomer retiring soon, you should start planning for retirement as soon as possible.

Key Aspects of Financial Planning

Seniors should be managing three things while retired: Income, liquidity, and growth. To ensure financial stability, there are a number of steps to take and things to consider.

What sources of income will you have during retirement?
- Do you have stock dividends?
- Rental property income?
- Pensions from previous job?
Do you have enough cash (or “liquidity”) to pay for living expenses and other financial liabilities without dipping into your investments?
Do you have enough cash for both anticipated and emergency medical costs?
Are you investing your money for capital appreciation (“growth”) and to keep up with inflation?

Financial planning for seniors is essential because seniors do not have time to make up for bad investment decisions or to allow their assets to grow.

Other Factors

Besides, income, liquidity, and growth, there are other factors to consider when considering your financial plan.

Your sex will affect how you plan. If you are a woman, you may need a larger nest egg to retire on because women generally live longer than men with a life expectancy of 81 years vs 76 years for men.

Another factor to consider is inflation, which erodes the purchasing power of your dollars, every year.

Unless your money is growing to account for inflation you are actually “losing” money every year. And with the current massive stimulus packages in 2020, inflammation may dramatically increase in the future.

Also, if you hope to leave a financial legacy for your remaining family members, then financial planning becomes absolutely essential.

So the question is not whether you need a financial plan. The question is WHEN do you start your plan?

Why Financial Planning for Seniors Is So Crucial

A couple examining financial documents at home

Financial planning for seniors (and really anyone else) is powerful because you want to ensure you have enough money to last the rest of your retirement. Imagine being 70 years old with dementia and not enough financial resources to pay for your medical bills.

The alternative to a stressful retirement is living a relaxed and stress-free lifestyle that is best for you with the comfort that you will be taken care of during your retirement. With a plan in place and the discipline to work the plan, you can achieve the financial stability you need to live out the remaining years of your life.

In addition to the factors mentioned above, savings, investment planning, spending habits, and estate planning are all crucial areas to think about. These will ensure that you don’t outlive your financial resources and that you have financial stability.

There are four major steps to think about.

Maintaining good financial records
Budgeting how much money is spent and managing your cash flow
Developing an investment program that provides ever-increasing returns
Following sound policies concerning income tax obligations and additional financial commitments

What Happens If You Plan Well

Planning a stable financial future before retirement kicks in is vital if you want to have a future that is stress-free. However, more and more seniors are ill-prepared for their future. So start planning NOW!

Doing so can lead to the following situations:

You maintain control over what you can do during your retirement
You easily deal with unexpected events and emergencies
You maximize your savings into investments that grow into a nice nest egg for you.

You could develop a financial plan on your own, especially if you’re good at finding information. But, most people would benefit from using a financial planner.

These experts know much more about the field than you do, including any complexities or surprises that you need to consider.

To really begin your search for a financial planner, you need to understand the different types of financial planners and advisors available for you to choose from, which is what we’re covering in the next section.

Choosing a Financial Planner

When looking for the best way to plan financially for the future, picking the right financial planner is essential.

Before you begin looking for one, you should understand the differences between the types of financial planners that exist. Here is a list of the more common types of financial planners you will come across.

Types of Financial Planners

Financial Coaches

Financial coaches are perfect if you have an entry-level need for financial planning.

They can help you to understand the basics of personal finance, including how to save money and decrease spending.

Financial Consultants

Financial consultant is a general term that anyone can use.

Occasionally, there is a distinction made by chartered financial consultants. These financial planners will need to follow requirements that are similar to those Certified Financial Planners (CFP) need to abide by.

Chartered financial consultants have to comply with the American College’s code of ethics. If you want to discern whether someone is a regular financial consultant and a ChFC, then you can verify that here.

Broker-Dealers & Brokers

Broker-dealers are individuals or companies in the business of buying and selling securities. These can include stocks, bonds, and mutual funds. A broker-dealer also has the authority to purchase and sell securities for their clients.

Broker-dealers and brokers must be registered with the SEC, and are generally members of FINRA. There are special licenses that will allow these financial planners to sell different types of securities. Those who hold a Series 6 license can sell mutual funds, while those who have a Series 7 license are allowed to sell other securities as well.

Portfolio/Investment/Asset Managers

Portfolio managers, investment managers, and asset managers are all involved in managing the investment portfolios of their clients. Portfolio managers and investment managers are likely to only be concerned with managing investment portfolios. However, they do sometimes also provide additional financial planning services.

Investment Advisors

Investment advisors are financial professionals who are registered with the SEC to provide financial advice. These are individuals or companies who are paid for giving out investment advice to their clients. They are also allowed to directly manage client assets.

Legitimate investment advisors will be listed in the BrokerCheck directory.

Certified Financial Planners (CFP)

Financial planners who have gone through extensive training and have amassed a great deal of experience (according to the CFP Board) also have to pass a certification exam. The standards to be a certified financial planner (CFP) are very high.

As a result, they are allowed to provide services that do not need regulation. For instance, they can provide guidance regarding how to pay off debt, create budgets, and other things. The best way to find a certified financial planner is to look at the CFP Board’s website.

Wealth Advisors

Wealth advisors will almost exclusively take on clients with a high net worth. They will provide bespoke and total financial planning services, along with investment advice. These investment planners assist their clients in all areas of their financial lives.

Areas like estate planning, tax assistance, charitable giving, health insurance, and others are all touchpoints for them. The minimum amount someone’s investments will have to be to work with a wealth advisor is to the tune of several million dollars.

Robo-Advisors

A newer type of financial planner is the robo-advisor. This is essentially an investment bot that uses complex computer algorithms to put together an investment portfolio according to your goals.

Robo-advisors are increasingly becoming an option being taken by people who want help managing their investments in an impersonal way without much effort on their part. You can find some popular robo-advisors here.

How to Find a Financial Planner

When looking for a financial planner, look at the need as a job opening. A financial advisor is akin to a chief financial officer, except for your financial future. You will want to find someone you feel comfortable working with for years to come.

While the process may be time-consuming, it is necessary to do your due diligence to avoid issues in the future. When you find the financial planner right for you, your future will become more stable and comfortable. You will be able to rest easy, knowing your finances are in good hands.

Something to keep in mind is that not all financial credentials are the same. Some of them are easy to get, while others take years to obtain. Reputable financial planners will have the designations of Certified Financial Planner (CFP) or Personal Financial Specialist. Also, they may have a Chartered Financial Analyst (CFA) certificate.

Another way to verify financial planners is to check whether they are members of the National Associated of Personal Financial Advisors. To be a member of this organization, financial planners must have credentials that go beyond what is the bare minimum to be a financial planner.

Use Financial Planner Search Engines

Using the power of online search engines is a great way to screen financial advisors. You can narrow down financial planners by ZIP code and other filters to get the right kind of financial planner. There are a number of different search engines you can use, such as the following:

Ask the Right Questions

In my experience, finding a good objective advisor who is objective is the challenging part.

Many brokers and financial planners make money off of you by selling you a product. In turn, they receive a commission from your purchases. They want to sell you their product and not necessarily what you need. I am not saying don’t buy their financial products or that all financial planners will cheat you BUT be aware of their financial motivations to promote some products.

Other times, these financial advisors have limited knowledge of what is available in the marketplace as well. Yes, this is possible as well.

People in this situation know what they know but don’t know what they don’t know. I met a financial planner who told me that after 20 years in his field, he was just learning about what I had learned a few years into the “money game.”

And like many things in life, the best way is to find a friend or someone you trust to nudge you in the right direction. I have done this for a few friends who have come to me for advice or recommendations on how to proceed.

But as you go along your journey to find a financial professional, asking the right questions will help you separate the ‘bad’ financial planners from those who can help you or your aging parents. Here are some questions you can ask them:

“How long have you been practicing?”
“How do you get compensated?”
“Will you be able to walk me through different kinds of retirement projections?”
“Can you describe your ideal client to me?”
“Have you ever been accused or convicted of violating your fiduciary duties?”

You can also ask them to specific technical questions to explain one or more financial concepts to you but the key is you have to know what you are talking about.

This means educating yourself as much as possible before the meeting. Questions, such as “What is a laddered bond portfolio?” or “What investment vehicles do you recommend for my situation?” can be powerful.

When you ask them specific questions, you can discover how they communicate and how knowledgeable they are in the areas you need help in.

Ultimately the only person you can rely on take care of your money is YOU. You are accountable for all of your financial decisions – good and bad. It’s all a learning process but you have to start somewhere, as I did 12 years ago.

Maximizing The Assets You Have As a Senior

What can you do if you have gotten to retirement age with not enough assets to hold you over? Here are some steps you can take to secure your future financially.

Create a budget and stick to it.
Cut out major non-essential expenses from your budget.
Extend your career until you have more saved.
Get a second job or gig that brings in money on the side.
Downsize your home.
Sell your car, and use public transportation or ridesharing services.
Increase the amount of your deductible on your homeowner’s insurance policy.
Look for and use senior discounts.
Choose generic products over their more expensive brand name cousins.

When you take these steps, you will shift into a better position financially during your later years.

Remember, it takes a team of financial professionals to create a comprehensive plan for you.

And no matter the age you are or the financial situation you are in it is never too late. Do what you can now, take baby steps, and implement your plan. Your Golden Years depends on it.

Advance Planning Support

It’s never too early to think about the future. Kapok’s Advance Planning service can help you understand the process of advance care planning, including the paperwork involved and important areas to think about.

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Financial Planning for Seniors – Tips, Tricks, and More