Planning for the Future
Aging Well, Living Well Home > Planning for the Future
Health Care
Advanced care directives
Advanced care directives are instructions, prepared ahead of time, that direct a person's medical care should she become unable to do so herself. Advanced directives also can appoint someone to make health care decisions for a person.
Types of advanced care directives:
- Verbal instructions — The patient tells her doctor and family members her wishes.
- Organ donation — A person fills out an organ donation card and keeps it in her wallet. Many states let you choose to become an organ donor when you get your driver's license.
- Living will — This is a written, legal document that spells out the wishes of the patient in the event of terminal illness or life-threatening injury. A living will usually includes specific situations and treatments the patient does not want (such as CPR, tube feeding, hydration, etc.).
- Special medical power of attorney — This is a legal document in which a person names someone else to make her health care decisions for her should she become unable to communicate.
- DNR (do not resuscitate) order — This document states that CPR is not to be performed if the person stops breathing or the heart stops beating.
Money
Older women tend to have fewer sources of retirement income and are more likely to be poor than older men. Because of this, women need to:
- Save more for retirement
- Learn money management skills
You may be retired and living on a fixed income, or you may still be working, trying to save enough for retirement. Either way, it is important for you to learn the basics of money management.
Financial Planning
Today, women can expect to live longer than their spouses. A longer life means a longer retirement, which means you will need more money for your retirement. Financial planning helps you manage your money so you can achieve your goals. Learning the basics of financial planning is something everyone should do. Visit mymoney.gov for more information about financial planning. Or talk with a professional financial planner. Financial planners can help you meet your financial goals by helping you manage your money. Be aware that you will be charged for the financial planner's services. If you decide to consult a financial planner, be sure to work with a fee-only planner. This type of financial planner works only for you and does not receive commissions on your investments.
Tips on choosing a financial planner include:
- Know what you want. Determine your financial goals (How much would you like to have saved for your retirement?) and needs (How much income do you need each month?).
- Talk to others. Get referrals from people you trust, such as family members or friends.
- Interview more than one planner. Ask the planners about their education and experience. Ask how long their company has been in business, what the fee structure is, and how you will communicate with her or him.
- Get it in writing. Ask for a written advisory contract or engagement letter to document the nature and scope of services the planner will provide. This document also should include details on the fees for financial planning services.
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To help you set or adjust your own plans for affording retirement, here are some different sources of income, including some potential pitfalls to avoid.
The primary and, in many cases, only source of income for women in their retirement years is Social Security. Social Security retirement benefits are available to people 62 years of age and older. Be aware that the younger you are when you start receiving benefits, the less money you will receive every month. For example, if you start receiving your Social Security benefits before your "full" retirement age (65 to 67, depending on the year you were born), your benefits will be reduced permanently from what they would be at your full retirement age. Employer pension plans usually have options somewhat similar to those of Social Security.
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IRAs, 401(k)s, and Other Retirement Savings Plans
As with your Social Security and pension benefits, you may want to delay tapping into your retirement accounts for as long as possible, so they can continue to grow. However, if you need additional income, Individual Retirement Accounts (IRAs) and other retirement savings can be a good source.
Also review your retirement portfolio — your mix among stocks, stock mutual funds, CDs (certificates of deposit), bonds — to be sure it's diversified. (For ideas about how to rebalance your portfolio as you age, see Retirement Strategies for All Ages: A "To-Do" List.)
Having a credit card is often a necessity for most senior citizens — from paying for medicine and emergencies, to booking a vacation. But for seniors living on a fixed income, carrying a large balance from month to month and running up significant interest charges could lead to big financial trouble. In the worst cases, the debt becomes impossible to manage and a major source of stress for the account holder and the family.
Another problem for seniors is having too many credit cards. That's because the more cards you have, the more opportunities you have to get into debt. Having a lot of cards also can make it harder to keep track of when your monthly payments are due or to even realize that a thief may have stolen one of your cards.
For more information on using credit cards wisely, see Choosing and Using Credit Cards from the Federal Trade Commission.
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Home Equity Loans and Lines of Credit
If you own your home, you may be able to get a home equity loan. A home equity loan uses the equity in your home as collateral and is often tax deductible (check with your tax advisor). Equity is the difference between what you owe on your home and its current market value. For example, if you owe $100,000 on your mortgage but your home is worth $150,000, your equity is $50,000. A home equity loan is a one-time loan for a lump sum, typically at a fixed interest rate.
A home equity line of credit works like a credit card in that you can borrow as much as you want up to a preset credit limit. The interest rate for a line of credit usually is variable, meaning it could increase or decrease in the future.
For seniors on a fixed income who have paid their mortgage in full or whose mortgage is almost paid in full, home equity loans are tempting to use to pay for expenses. But doing so is risky. In general, the best uses for home equity-type loans are to purchase goods or services with long-term benefits, such as home improvements that add to the value of your property.
These are home equity loans available to homeowners age 62 or older. In general, a reverse mortgage is a loan that provides money that can be used for any purpose, and the principal and interest payments typically become due when you move, sell your house, or die. A reverse mortgage also differs from other home loans in that you don't need an income to qualify and you don't have to make monthly repayments.
Although reverse mortgages can be an important source of funds, they also have serious potential drawbacks. In particular, you will be reducing your equity, perhaps substantially, after you add in the interest costs.
People mostly think about life insurance as a source of income when someone dies, but they forget that many insurance policies also can be a source of cash at other times.
If you have a life insurance policy with built-up cash value, you can borrow against that money and either repay the loan with interest or reduce the death benefit accordingly. Example: If you have a $100,000 life insurance policy but you owe $20,000 on a loan from that policy, your heirs would receive $80,000 as the insurance payout.
Medical and Long-Term Care
Most people don't like to think about getting older, and they often put off medical and long-term health care planning as long as they can. Yet through planning, you can address the tough issues—the realities of aging, declining health, and loss of independence—now, when you are best able to deal with them.
The cost of long-term care can vary depending on what kind of care you need, where you get the care, and where you live.
Estate Planning
Everyone should have an estate plan. Having an estate plan can reduce your tax burden, but, more importantly, it can spare your loved ones the pain of dealing with finances while also grieving your death. A good estate plan protects your property, ensures your wishes are carried out, and allows for the quick distribution of your assets.
First, you'll want to inventory and assign a value to everything you own. Here's a list to help get you started.
- Residence
- Other real estate
- Savings (bank accounts, CDs, money markets)
- Investments (stocks, bonds, mutual funds)
- 401(k), IRA, pension and other retirement accounts
- Life insurance policies and annuities
- Ownership interest in a business
- Motor vehicles (cars, boats, planes)
- Jewelry
- Collectibles
- Other personal property
After you've made your list of assets, you'll want to use that information to estimate the total value of your estate. Now it's time for some planning. Next, you will want to:
- Write a will
- Establish trusts
- List your beneficiaries for insurance policies and retirement accounts
Remember that estate planning is not a one-time event. Things can (and do!) change. Take another look at your estate plan if:
- The value of your assets changes a lot
- You marry, divorce, or remarry
- You move to a different state
- The executor of your will or the administrator of your trust dies or becomes unable to fulfill this duty, or your relationship with that person changes significantly
- One of your heirs dies or has a permanent change in health
- The laws affecting your estate change
Estate planning is complicated, and estate laws are always changing. Be sure to consult a lawyer who deals with family law or estate planning and perhaps a Certified Public Accountant (CPA) or estate planner for help.
Living
As you get older, it becomes harder to live on your own. When you find you need help with daily living, there are different types of long-term care available to you, depending on the amount of help you need.
Most costs related to long-term care are not covered by Medicare. Medicare can help pay for home health care if you meet certain criteria. And Medicare covers nursing home care in some cases, if you meet certain criteria.
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