Safeguarding Your Retirement: The Importance of Financial Awareness for Seniors

Baggage comes with getting older, including the need to organize personal finances. Money concerns and financial considerations do not lessen as we age. Indeed, they tend to get more complicated. Why? As retirement nears, most seniors must navigate a pair of complex federal programs—Social Security and Medicare—that are meant to cushion our later years. However, the many rules, options and penalties associated with each require careful planning and decision-making.

For most seniors, the challenge is finding the right mix of benefits, liquid assets and income streams that allows them to live comfortably from day to day while still having enough reserves to meet major health and housing expenditures that arise.

Money worries vary widely among older folks depending on how many or little assets they accumulate and how wisely they choose to take their distributions. These tips may help you prioritize your steps.

1. Plan and Prepare

Just as guidance from professional financial planners and advisers throughout one’s working life is important, it is vital in retirement as well. Studies show that many seniors possess low levels of financial literacy. It is essential for older adults to build their financial management skills, including knowing when and how to claim benefits and what asset portfolio makes sense for them. You can attain these skills and knowledge through your employer’s human resources department, workshops, seminars, online resources, family and friends.

Experts advise adults to start preparing for their golden years long before retirement age. Responding to life-changing circumstances, such as marital status or health, may require one to adjust their financials. While planning can help make sound decisions, some things require education and literacy in the moment they occur. Examples of these “just-in-time” decisions include when to claim Social Security, enroll in Medicare, or downsize a home.

2. Know the Ins and Outs of Social Security

Seniors are able to start claiming their Social Security benefits between ages 62 and 70. The difference between the expected benefit at each age is significant. Deciding the optimal time to collect it is imperative since it is a substantial source of retirement income for nearly 9 out of 10 people ages 65 and older.

For adults with shorter life expectancies or immediate needs, receiving Social Security before full retirement age could be beneficial. Yet, studies show many claimants could benefit by waiting to collect later. Because Social Security provides guaranteed, inflation-adjusted income for life, it provides unique protections against longevity risk, inflation, and poverty in later ages, according to an aging.senate.gov summary.

Surviving spouses receive either their own benefit or their spouse’s benefit, whichever is higher. For married couples, that is why it is vital to know when to claim benefits for the higher earner in the household. People can work and claim benefits, work and delay benefits, or stop working and delay benefits. Each path has its own considerations and effects in terms of benefit payout.

Other sources of income, such as savings, retirement accounts, and pensions, are other key assets that should be considered when deciding to collect Social Security.

3. Understand the Medicare Musts

Medicare’s guaranteed health coverage is more critical than ever due to the escalation of health care and health insurance costs. Seniors enroll in the program through the Social Security Administration. Once a senior starts receiving Social Security benefits, they are automatically enrolled in Medicare Parts A and B. Folks not receiving Social Security must apply for Part A and decide whether to apply for Part B. Seniors must also choose how to receive coverage through enrollment in a Medicare Advantage plan or other plans.

Those not automatically enrolled in Medicare must navigate enrollment periods to avoid penalties. Seniors need to be wary of scammers targeting them during their initial sign-up and open enrollment period.

4. Research Before Annuitizing

Seniors with a 401(k) may have the option to purchase an annuity. An annuity is an investment option that can provide a guaranteed income for an individual or their spouse throughout their retirement. Annuities are purchased for a set period and pay out a specific amount in retirement based on the investment strategy and amount invested. The decision to annuitize is complex and carries budgeting considerations and transaction costs. Knowing longevity, inflation and market risks is important when deciding to annuitize a 401(k).

You can learn more about the risks and rewards of rolling your 401(k) into an annuity from Kiplinger Personal Finance.

5. Know What Else You Should Consider

• Experts recommend maintaining a level of liquidity (easily accessed money) in order to pay for any large or irregular expenses associated with medical and long-term care needs.


• The decision to downsize or move into alternative housing is often driven by financial, health, or other personal reasons, such as losing a spouse or partner. Thus, aging in place is not always an option for, or desired by, all older adults. By working with your financial adviser and talking with your family, you can better understand what options may be available to you as you age. Right at Home offers a FREE RightConversations Guide to help families as they have a conversation about aging.


• Research any senior savings programs you may be eligible for by joining AARP or other organizations; file for a homestead exemption; and ask vendors you frequent if they offer senior discounts (some stores and service providers do). Check with your Area Agency on Aging for meal programs or other services you may qualify for.


• Financial professionals like accountants, advisers and planners can look at your various assets and resources to assist in decision-making and ensure you are aware of your options. AARP offers a free online resource to help as you consider whether a financial adviser can meet your needs.


• The Money Smart for Older Adults Program raises awareness on preventing fraud, scams, and other elder financial abuse. It is a free program offered by the Federal Deposit Insurance Corp. and the Consumer Financial Protection Bureau. Topics include investment fraud, avoiding telephone and internet scams, and planning for unexpected life events.


• Bottom Line: Do not leave your financial future to chance. Having diversified assets and income streams that maximize everything you have earned and are entitled to receive should be the goal. Just remember that in retirement, every little bit helps, especially when your living situation changes. That is when you want the security of a personal financial safety net. That protection only comes with knowledge and action.

These tips do not constitute financial advice or recommendations for your financial decisions. Consult a knowledgeable and experienced financial adviser suitable for your situation.