Guest Author - Reshma Vyas
Financial concerns and priorities change with every phase of life. However, there is one constant; the need to consistently save more money. Saving money is never easy because life gets in the way. Somehow, there is always some obstacle or life crisis which can prevent us from saving more money. For seniors, saving money is an even greater concern as they have to contend with a whole range of special physical and financial considerations, regardless of whether they are working or not. There are several reasons why seniors need to save significantly more money and allocate a greater portion of their income to cash savings specifically to help meet the unanticipated costs for daily living.
1. Housing. This is, by far, one of the biggest expenses for seniors. Expenses for property maintenance, taxes, HOA or condo fees can increase over time.
2. Health care. This is the second biggest expense after housing. The increase in life expectancy only means one thing: seniors have to become even more diligent about saving money in order to pay for out-of-pocket health care expenses which will likely increase over time. Seniors generally require more health care services as their age progresses. Health maintenance is expensive and becomes harder as people age. Paying for out-of-pocket health care expenses can be a tremendous financial burden, even for those seniors who are working and are covered by employer insurance. Many employers are scaling back health care benefits. Out-of-pocket health care expenses can include hearing services, health and medical supplies, home health care services, nursing home care, prescription drugs and vision care and services. Aging brings forth physical and emotional changes and challenges. Seniors need to be particularly scrupulous about dental care as it is core to their physical well-being. Although it is possible to find an affordable dental plan for seniors, these types of plans generally have limited options. The costs for dental procedures not covered by insurance can be prohibitive. Savings should be carefully set aside solely to meet these types of expenses.
3. Auto insurance and maintenance. While some seniors may be able to forego owning a vehicle and save more money by using public transportation, it may not be a feasible option for everyone. Allocating some money to an emergency fund to pay for any unexpected auto repair is a prudent strategy. You may also want to have enough cash savings to make auto insurance payments for 6 to 9 months as a precautionary measure. Increasing fuel costs are another concern. Check your savings to see whether or not you have an adequate cash reserve to cover all these costs.
4. Job loss/unemployment. Having cash savings equivalent to one year’s salary to offset the loss of income due to a sudden layoff or reduction in salary is a necessity. Income, in an economic environment characterized by a scarcity of jobs, particularly “good-paying” jobs, is not easy to replace. Ageism is also realistic concern.
Cash savings to meet unanticipated, living expenses should be kept in safe, FDIC insured checking or savings accounts. As you review your monthly savings goals, you will also want to give some thought as to how you want to allocate your cash savings to accommodate various, unexpected financial expenses. Building a hefty cash reserve to help meet unanticipated, living expenses should your income stream be disrupted is not only a sound financial strategy but it will also provide peace of mind and solace.
For informational purposes and not intended as advice.