Seniors and Debt: How to Cope with Financial Setbacks Post-Retirement
From: www.annuityfreedom.net
Retirement is supposed to be a time to relax, enjoy simple pleasures, and perhaps check items off your bucket list, like traveling to faraway places. Unfortunately, that worry-free scenario is increasingly rare. Despite decades of working hard and saving, many seniors are finding that unexpected life events have derailed their finances. Medical or dental problems, divorce or widowhood, major home repairs, scams, and stock market losses are just some of the things that can upend your plans.
If financial curveballs in your golden years have left you feeling anxious and insecure, saddled with bills and debt, you are not alone. There are plenty of proactive steps you can take to get yourself back on more solid financial footing. This guide will address some of the common money challenges seniors face, then provide a series of steps you can take to safeguard your finances and respond to a crisis.
10 of the Most Common Financial Challenges for Seniors
Many of today’s seniors were raised not to talk about money, but that can leave you feeling like you’re the only one who’s struggling. You’re not. Even the best-laid financial plans can fall short when life surprises you — and it always seems to do so at the worst possible time. Maybe the bottom dropped out of the housing market right after you put a chunk of your savings into real estate. Or perhaps that part-time job you were using to supplement your Social Security check went away when the coronavirus hit.
Maybe you’re still dealing with the fallout from the 2008 recession, or perhaps an unexpected dental problem cost you a bundle. Unfortunately, there are a lot of events that can sucker punch you financially in retirement. The obvious questions are: What are my options and how do I turn things around? Of course, the answers depend on your situation. Here are some of the most common things seniors like you are facing.
- Medical costs
According to Fidelity Investments, a 65-year-old couple retiring in 2019 could expect to spend $280,000 on medical care during retirement. That’s a hefty chunk of change. Cost estimates like these are so worrisome that, in a 2019 AARP/University of Michigan poll, 45% of Americans ages 50-64 said they had little or no confidence that they’d be able to afford health coverage upon retirement. So, if you’re worried, you’ve got plenty of company.
- Dental problems
Oral care can get more complicated as you get older, with the cost of root canals, cavities, crowns, or dentures eating into your savings. The CDC reports that 96% of adults 65 and older have had a cavity, and 1 in 5 have untreated tooth decay. That same proportion — 1 in 5 — have lost all their teeth, and slightly more than two-thirds have gum disease. Yet according to the Kaiser Family Foundation, 37 million people, or 65% of those on Medicare, had no dental coverage as of 2019. Half of Medicare recipients hadn’t seen the dentist in the previous year, and 19% spent more than $1,000 out of pocket.
- Widowhood
Being widowed is not as big a risk factor for poverty as it once was, but a spouse’s death can still lead to significant financial challenges. Whereas 37% of new widows became poor in the 1970s, that figure fell to between 12% and 15% by the 1990s. Still, a recent Congressional Research Service report on poverty found that the figures haven’t changed much since then: While 4.3% of married women live in poverty, 13.9% of widows do.
- Divorce
Poverty rates were even higher for divorced women than for widows in the CRS study, at 15.8%. Divorces can be expensive for both parties, often costing an average of $15,000 per person — and that’s just for the divorce itself. Afterward, you’ll become a single-income household, losing out on financial advantages such as joint tax filing and lower auto insurance rates.
And while a University of Maryland study of divorce rates found the rates dropped between 2008 and 2016, it also found the highest rate of divorce was among those 55 and older, and those who had been married more than 30 years.
- Stock market volatility
The Great Recession of 2008 presented huge challenges, and in some ways, the economic fallout from the COVID-19 pandemic has been even worse. From February 2 to March 20, 2020, the Dow Jones Industrials shed 5% of their value, including a single-day decline of 12.9% on March 16. The losses of 2007-2009 were more sustained (at least so far), with the Dow Jones falling 53.7% over roughly a year and a half.
Every downturn is different, with different causes and varying consequences: While the Great Recession was the result of financial imbalances, the pandemic’s financial crash was created by an external factor: the coronavirus itself and the self-quarantine measures meant to contain its spread. In both cases, however, large channels of cash simply vanished, leaving investors with tough choices and hardships.
- Major home repairs
Many of us have experienced the frustration of having to call a plumber to deal with a water leak flooding the basement or a roofer to patch a leaking roof. The need for home repairs is seldom expected, and the cost can be difficult to absorb.
Replacing your roof can set you back $5,000 to $10,000. A new septic system will likely cost you at least $3,000 — and perhaps up to three times that much. Replacing an air conditioner, fumigating your home for termites, rewiring your electrical system, and fixing your foundation are other hefty bills you may encounter without warning.
- Personal care
As we age, we can begin to require more help, and the costs of at-home care or a nursing facility are significant. The average cost of a home health aide in 2019 was nearly $4,400 a month, and even a semi-private room at a nursing facility can cost more than $7,500 a month. That’s more than what you’d spend to stay at a five-star hotel in Seoul or Brussels, and you’d even have some money left over for a dinner out.
