Financial tips for seniors

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As many consumers get older, they often face issues such as how to maintain their lifestyle and pay for medical expenses on a fixed income for years into the future. Here are banking and other money-management tips for seniors to consider for their retirement years.

1. Decide if you need financial help from an expert, and then choose wisely. A financial advisor could help answer questions such as how quickly to take money from savings and how to invest in your later years. But FDIC Community Affairs Specialist Ron Jauregui cautioned that “before you follow the advice of a supposed ‘expert’ who claims to have special credentials for advising seniors, research what that title may or may not mean and the advisor’s background.”

According to a report by the Consumer Financial Protection Bureau (CFPB), the training, standards and regulatory oversight for more than 50 senior designations used by financial advisors can vary significantly. To learn more about professional designations and for tips on choosing an investment advisor, the Financial Industry Regulatory Authority has a Web site at www.finra.org/Investors/. Prepare for the possibility that you may become unable to handle your finances. Consider writing down a list of your financial institutions and account numbers and keeping it in a safe place that would be accessible by your loved ones in an emergency. An attorney can help you decide if you should have a legal document known as a power of attorney (POA), which would allow one or more people you designate to make key decisions with as much or as little of your financial or personal life as you choose.

Note that a “durable” POA takes effect when you sign it and remains effective if you become incapacitated, while a “springing” POA generally becomes effective only if and when you have been declared incapacitated. (The laws governing POAs vary from state to state, so consider consulting with an attorney who is knowledgeable about such matters.) You can also add a co-owner to a deposit account, but that person has the ability to conduct transactions, including withdrawing money from a checking or savings account, without your prior approval. Your banker or attorney may be able to help you identify other possible alternatives, but you still must think carefully about who you give access to your money. Also, if your co-owner owes a debt and cannot pay it, the funds in your account may be taken to pay the debt.

3. Develop a spending plan for your retirement. Having a plan for your money and limiting expenses in retirement is important. Consider new ways to cut costs, such as by letting your auto insurer know you no longer drive your car to work. “Consider continuing to put some of your income into savings, especially for short-term goals such as holiday gifts, because that can help you avoid a large, sudden withdrawal from your retirement investments,” added Luke W. Reynolds, Chief of the FDIC’s Outreach and Program Development Section.

4. Consider limiting the mail and phone calls you receive from marketers. Unsolicited offers from unfamiliar companies can result in you overspending your budget or paying for shoddy merchandise or service from vendors who don’t stand behind their products. Consider being added to the national Do Not Call Registry (call 1-888-382-1222 or visit www. donotcall.gov). Also review the privacy disclosures that banks and other financial companies you do business with send at least once a year. They explain if and how you can limit certain sharing of your information. For more guidance on stopping unwanted mail and phone calls, see information from the Federal Trade Commission at www.consumer.ftc.gov/articles/0262-stopping-unsolicitedmail-phone-calls-and-email.

“To protect yourself in general, be wary if someone approaches you unexpectedly to say he or she specializes in helping seniors with home improvements, health cures or financial products. Don’t let anyone make you think you need a good or service that you didn’t need before,” Reynolds said. “In fact, a recent study suggests that many consumers pay hundreds of dollars each year in fees that get automatically charged to their credit card or bank account, often on a monthly basis, for a subscription or other service they probably never really wanted. So closely review your credit card and bank statements to find any charges that you may be able to cancel because they are for products or services you can do without.”

5. Review your credit reports even if you don’t plan to apply for a new loan. Why? Mistakes or other errors on your credit reports could make it more costly for you to buy insurance or borrow money (for example, if your credit card company raises your interest rate on future purchases because of a problem tied to a credit report). And, monitoring your credit reports is a way to detect identity theft. Order your free credit report at least once every 12 months from each of the three main credit bureaus at www. annualcreditreport.com or by calling 1-877-322-8228.

6. Think twice before accepting an offer to “advance” (lend) you a portion of your future pension, Social Security or other retirement income. These offers are similar to payday loans and they likely involve costly fees and interest. You can also find yourself taking out similar loans in the future — paying additional fees and interest charges — to make up for new cash shortages as you repay the original loan. “If you need to borrow money fast, check with your bank and other financial institutions, and compare the products they offer based on the Annual Percentage Rate,” advised Reynolds.

7. Use credit cards cautiously. Accumulating debt can be costly, yet many seniors have considerable credit card debt. Before making purchases using your credit card, consider whether you will be able to pay your balance in full when the statement arrives, so you will avoid costly interest charges. Even small purchases can add up to big credit card bills. 8. Remember that a reverse mortgage will eventually have to be paid back — with interest. Reverse mortgages allow homeowners age 62 or older to borrow against the equity in their homes without having to make monthly payments as long as they meet the terms of their loan agreement, such as staying current on property taxes. However, the money borrowed plus interest must eventually be repaid, usually when you or your heirs sell the house.

9. Think about ways to turn a hobby or another interest into a part-time job. Other possibilities for supplementing your income in retirement include a seasonal job or freelance consulting. But consider if this extra money could affect other aspects of your finances tied to your income, such as a potential increase in your Medicare costs or a possible temporary reduction in your Social Security benefits. Also consider any income tax implications.

10. If you’re considering an annuity, understand the potential pros, cons and costs. You’ve probably seen or heard promotions for annuities, which are financial products tied to a contract between a consumer and an insurance company. Insurers sell annuities but so do other financial institutions, including banks. You buy an annuity by making either a single payment or a series of payments to the insurance company. In return, the company promises to make payments to you, either as one lump-sum payment or a series of payments for a specified time period. Because there are different types of annuities and a mix of potential benefits and risks, it’s important to learn as much as you can before investing. A good place to start is on the U.S. Securities and Exchange Commission’s Web site at www.sec.gov/investor/pubs/ varannty.htm or by calling the SEC toll-free at 1-800-732-0330.