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Six Financial Literacy Tips For Seniors

April 10, 2013
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April is Financial Literacy Month, and it’s important for seniors to think about how best to protect and preserve their assets. Speaking of literacy, though, just as we didn’t teach ourselves to read and write on our own, few of us have time to become fully literate about personal finance on our own. Most seniors need a trusted adviser who can take them through the basics, and hopefully guide them toward in-depth understanding. What I wrote early this year about picking a financial advisor still holds true; it’s an essential first step.

Here are a few other points that financial advisors think you should remember:

1. Know where your money’s going

Tracy Ann Miller of Red River Advisors acknowledges that 65% of Americans don’t have a budget. But not her clients. “I tell my clients all the time, it is the first step to getting your finances in order. You can’t plan for the future if you don’t know where your money is going today.”

2. Don’t rush your Social Security benefits

“Most people think they get to retirement and then just start drawing Social Security,” Miller says. “Not so fast!” – Good advice. Check out my NerdWallet blog on how to get the most out of Social Security. Then play around with T. Rowe Price’s Social Security Benefits Evaluator for some insights about timing, inflation and cost-of living adjustments.

3. Reevaluate those trusty bonds

Esther Szabo of KK Wealth Advisors understands “the attraction of bonds as safe investments, particularly for seniors; US Treasury bonds are seen as the safest type of bond.”  Bond values have increased due to lower interest rates and a shaky economy since 2008, and benefited as the Federal Reserve propped up bond prices with its Quantitative Easing program. “At some point, however, all three of these situations will change,” she warns; “When this happens, seniors who are too heavy into bond funds will see principal values decline.”

Her advice: Ensure that your funds are diversified and that the bonds’ maturation dates are staggered; be realistic about whether your total living expenses could ride out a drop in value.

4. Don’t expect magic from the market

We love our investments – but we’re too old for fairy tales. Dana Anspach, CFP, of Sensible Money reminds us: “Risk and return are two sides of the same coin. What about the 8% returns you see advertised in the newspaper? There’s always a catch. Maybe your money is tied up for 15 years. Maybe you get 8% the first year, but a low subsequent return and your money is tied up for ten years . . . I’ve watched many seniors learn the hard way. Almost every time it is because they believe in a tall investing tale that a savvy salesperson spins for them.”

5. Beware of friendly strangers

“Because senior citizens are often viewed as easy marks by those who’d like to separate them from their money, it’s important that anyone keeping an eye on an elderly person’s affairs remain observant,” explains Devanshu L. Modi, Esq., of the Florham Park, NJ-based law firm Lyon, Glassman, Leites & Modi, LLC. Modi’s website describes these four warning signs in detail:

  • Confusing double-talk – complex ideas even younger friends can’t understand.
  • Pressure to sign a document immediately, before an appropriate review.
  • Excessive friendliness – calling the client incessantly, taking them to lunch.
  • No paper trail – no statements in the mail, unfamiliar details surfacing.

The Certified Financial Planner Board of Standards’ Financial Self-defense for Seniors expands on these concepts even further.

6. Be prepared

Finally, don’t spread yourself so thin that you can’t handle the unexpected. Says Miller, “We’ve all heard the rule: you should have three months of expenses on hand. That’s what I recommend for my clients, but if you can’t get there, start somewhere. Put a thousand dollars aside so if you have an accident or car trouble you have something to fall back on.”

And get started on that budget!


Senior finance image via Shutterstock