What to Know about Aging & Financial Decline

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Aging is one of the most complex factors that affects your financial health. It’s crucial to make plans in advance so that your can preserve your finances as you age. There are two main concerns to keep in mind. The first is that eventually, you will want to retire, which means that you will no longer be drawing a primary income and you won’t have insurance from your employer anymore. The other concern is that as you age, your risk of a variety of medical issues increases. Dementia and other illnesses become more common the older you are, and they can both cost money due to treatment and reduce your functionality. Aging successfully means making sure you understand these issues and prepare for them accordingly so that you can stay financially stable.

Retirement planning is one of the most important decisions you can make. The earlier you start saving for your retirement, the better off you will be. A difference of just ten years in terms of when you start saving can mean many thousands of dollars in the assets and wealth you can build.

It is essential that you make sure to take full advantage of whatever employer-matched retirement savings programs you have access to through work. If you work for yourself, work as a contractor, or otherwise do not have access to such a program through an employer, then you will need to save on your own.

One good option for doing this is opening up an individual retirement account, or IRA. An IRA lets you deposit some money each year, which the bank running the account will use to buy stocks and bonds for you. Over time, the assets you own will tend to increase in value until it is time to retire, start selling the assets, and live off that money. The advantage of an IRA is that it will let you avoid some of the taxes that you would have to pay if you just bought the stocks and bonds yourself through a brokerage account.

Employer-sponsored retirement programs, which are usually 401k plans, work very similarly. They let you buy assets while avoiding some of the taxes. They also have the bonus of matching, where your employer will add some extra money to your account for free up to a certain percentage of your salary. If you have an employer-sponsored retirement plan, then it is still a good idea to open an IRA and deposit some money from your paycheck into that as well.

The reason this is so important is compound interest. The earlier you start saving, the more time your assets have to grow and build up. In the long run that is a very powerful and favorable equation. If you aren’t sure where to get started with retirement savings, then you might want to consult a certified financial advisor for help. The earlier you start, the better, but it is also never too late to start saving.

All of this planning is important because retirement means the end of steady income from work and the corresponding benefits, like health insurance. Government programs like Social Security and Medicare can help fill the gap, but you really need to do everything you can to have savings for retirement to protect yourself.

Confronting the medical side of aging is never pleasant, but it’s important to be aware of the risks. It’s also a complex issue to address. For example, dementia itself tends not to be very expensive in terms of care unless the person with dementia has reached the point of needing a nursing home or caretaker. At that point the costs can increase quite a bit. Similarly, a person with dementia might be highly functional for a long time and capable of managing their own finances, but at some point they will need help doing that.

Not all diseases are the same. For example, vascular diseases might be more expensive to treat, but they also tend to have less of an impact on functionality, depending on severity. In general, the elderly need more care, and that care tends to cost more, compared to younger adults. However, this is hard to predict. Some might have chronic conditions or other illnesses that impact their aging, while others might stay healthy for a long time. That makes planning challenging because you don’t know quite what to expect.

The biggest mistake most people make when it comes to aging and their finances is not saving enough. They under-estimate how much the loss of income will affect them, and neglect to plan for increased medical bills and needs. That is the primary reason that people experience financial decline as they age. Without enough of a buffer of assets and savings, it becomes hard to balance the flows of money and stay stable. That might have implications like having to work past the planned retirement age or not being able to retire at all because the loss of income would cause too much harm.

Declining finances in old are not inevitable. It is possible to prevent that outcome with enough savings. Additionally, it is not a guarantee that everyone will go through a significant decline as they age, because the effects of aging vary for each person. What is true is that many people regret not saving more and starting their saving earlier when they approach retirement age. The safest way to address financial decline is to try to prevent it long before it can start. Aging is not the end of financial health– it is simply a transition to a new stage that needs its own plans and preparation. It’s important to take it seriously and to treat the process with respect so that you are not caught off guard by its features. That is the best way to ensure you can forestall challenges to financial health due to aging and deal with those challenges when they do arrive, protecting your financial and emotional wellness at the same time.


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