What are the most common financial/legal challenges of aging?

 

“Most Common Financial/Legal Challenges of Aging”
With over 10,000 Baby Boomers turning 65 every day, the financial and legal challenges that come with aging will only become more and more common.

What do seniors and their loved ones see as some of the biggest financial/legal problems facing them?

1. Financial security

Unfortunately, nothing ever gets cheaper. Whether it’s related to housing, utilities, healthcare, food or any of the other necessities of life, the rising costs of living while on a fixed income means growing restrictions on a senior’s budget—which can also mean doing without the comforts to which one has become accustomed.

This will be a continuing challenge as most seniors will need 70% to 80% of their pre-retirement income to keep up with the cost of living once they stop working. With a budget in place and responsible spending, however, there are things you can do to ensure the money you have goes farther.

Pay your mandatory expenses first before making nonessential purchases. These should include rent or mortgage, prescription medicine, utilities, food (that doesn’t include dining out at higher-end restaurants) and health insurance. Until these are covered, you shouldn’t incur expenses for anything else.

Shop wisely. Don’t wait until you’re completely out of something and then run to the grocery store. If you take a more systematic approach to shopping, clipping coupons and waiting for the items you need to go on sale, you’ll get the best value for your dollar.

Take advantage of senior discounts. Being thrifty doesn’t mean having to be a shut-in. There are plenty of opportunities for savings for older adults. Whether it’s restaurants or museums, theaters or clothing, different merchants offer senior discounts. It may be limited to certain hours or certain days, but it’s worth getting to know what’s available and using your age to take advantage of it as fully as possible.

2. The rising cost of healthcare

As a nation, we’re living longer. That’s the good news. The older we get, however, the more we need healthcare. And, unfortunately, counting on Medicare isn’t a solution. It doesn’t cover every cost and the out-of-pocket expenses can add up quickly.

A report in Journal of General Internal Medicine found that more than 75 percent of Medicare-eligible households spent at least $10,000 out of pocket. Over five years, that averaged $38,688 with 25 percent of those surveyed spending $101,791 out-of-pocket. As a result, there’s the distinct possibility of needing more money in retirement than you did while still working.

Of course, the amount spent on healthcare varied greatly depending on the medical condition, with dementia costing the most money. In fact, the out-of-pocket costs for final stage dementia care were found to be more than twice the average cost of dying from gastrointestinal disease or cancer.

Lacking long-term care insurance, the majority of these costs, 56 percent, were directly attributed to nursing home expenses

3. Financial fraud

Think it won’t happen to you? Then you just may be a prime target. A recent report notes that one in eighteen “cognitively intact” adults fall prey to financial fraud or abuse every year. That adds up to some $36.5 billion each year.

If that wasn’t bad enough, some $16.99 billion a year comes from technically legal tactics specifically designed to separate seniors from their money.

The report further noted that:

  • Small losses may indicate a vulnerability for larger ones. A senior who lost as little as $20 to scammers might be expected to lose up to $2,000.
  • A senior who receives just one telemarketing call a day is three times as likely to experience a financial loss as another senior who only receives none.
  • It is currently believed that 954,000 seniors are skipping meals as a result of financial fraud.

What’s worse, this is only the fraud that has been reported. According to the National Adult Protective Services Association, it’s estimated that just 1 in 44 elder abuse cases is ever reported. Isolation, embarrassment and unwillingness to report suspicions about a loved one to contribute to this lack of reporting.

Protection begins with acknowledging that you or a loved older relative are targets. It’s important to be aware of the different forms of elder abuse, including phone scams and less-than-best-intentioned caregivers—whether that is a family member or a paid professional.

4. Debt

Instead of entering retirement with a sizable nest egg, the house paid for and no note on the car, more and more Americans are finding themselves buried in debt. In 1992, only a quarter of homeowners over age 62 had a mortgage payment. By 2010, this figure had shot up to 45%. At the same time, seniors held some $18 billion in outstanding student loan debt—a jump of more than 500% from 2005.

Constrained by fixed incomes and unexpected healthcare costs, many seniors are trapped—harassed by bill collectors and looking at bankruptcy. Depending upon one’s state of residence, however, there are ways to prevent this.

The financial key to freedom can often be found in state laws that mandate that creditors can no longer sue debtors or place liens once the statute of limitations has expired. Should you or a loved one become mired in debt, financial counselors can provide advice and direction on how best to proceed.

5. Unfavorable job market

While seniors with little-to-no retirement savings may consider staying in the job market longer before retiring, those that are already out of the workforce may find it a harder road.

Unfortunately, the job market isn’t overly welcoming to seniors—no matter how much experience they may have. This, when businesses might opt for a younger employee more willing to take a lower wage.

Some suggestions include:

  • Get out of your comfort zone by applying for work not based on your previous employment. With over 40 years of experience, you’ve acquired a rich skillset that can transfer to other companies
  • Use your social and professional network to take job hunting to a higher level. Since age discrimination exists, you won’t be able to rely on job postings. Instead, find existing connections on the inside through sites such as LinkedIn who can endorse your skills and expertise.
  • Embrace social media. This demonstrates an aptitude to venture into new territory and learn new skills.
  • Adapt to a “gig economy” by picking up a project or consulting work—which could allow for more flexible hours and options like telecommuting.

6. Shortfalls in Social Security

With a growing number of seniors strapped by debt, facing rising healthcare costs and other financial obligations, it would be good to know that they can still rely on a regular, monthly Social Security check. While our older senior population may do just that, receiving an average of $1,360 each month, the younger seniors may see a reduction in payments in their lifetime. This, as Social Security is facing a budgetary shortfall of some $11 trillion in 2034. At that point, there will only be enough incoming revenue to pay out 79% of scheduled benefits.

Though Congress talks of reforming Social Security to prevent this from happening, the last time any meaningful progress was made was in 1983 when it acted to fill a funding gap of roughly 1% of incoming taxable wages. By 2034, however, that gap will be three times as large. The takeaway here is that while Social Security can certainly play a role in planning for future expenses, you can’t rely on it alone.

7. Feeling obligated to help adult children

As if seniors didn’t have enough financial constraints of their own, more and more older Americans have taken on another burden—this one out of love. A recent report from the Pew Research Center found that “among the 60-plus set without jobs anymore, 43 percent are still helping grown kids out with the bills.”

That includes some 20% of the previously noted $18 billion in student loan debt, which isn’t the best use of a senior’s line of credit. As one certified financial planner, Avani Ramnani, noted, “The children can get loans for education, but no one will give loans to the parents for their retirement.”

There is also the phenomena occurring which is turning younger seniors into a “sandwich generation.” They may be happily supporting their adult children, while also taking care of their own parents. While adult children in these situations received an average of $10,000, mothers received $13,750 and fathers receive $8,500.

Even if finances are not an issue, the situation can become a very emotionally charged one is the senior in question is providing more support to one child than another or taking on an additional burden of care for an aging parent in which other siblings are not participating.

The best solution is to set financial expectations for the children and have early, clear discussions about estate planning with the parent, siblings, a certified financial advisor and/or an elder care attorney.

Summary

As over 10,000 Baby Boomers turn 65 every day, the financial and legal challenges that come with aging will only continue to grow, as well. While there can be many financial pitfalls as you journey along the gray mile, you just may be able to avoid them if you’re aware of them in advance.

Tom Text

@TomJonesNBTX

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