Many seniors no longer have kids in the house, but when they retire, they must find a way to live their desired lifestyle and cover increased medical expenses without breaking the bank. During this new time in their lives, it’s smart for seniors to plan for the fate of their assets once they pass away.

These new challenges may seem daunting to some seniors. However, being prepared can help them enjoy this stage of life with as few money worries as possible. This article will cover five things seniors should know about their finances.

1. Creating an estate plan is beneficial

An estate plan lets individuals lay out how they want their assets distributed when they pass away and put other end-of-life wishes in writing. One of the most vital pieces of estate planning is making a will, which expresses who will receive the senior’s assets. To make a will, seniors will need to take inventory of all tangible and intangible assets, including:

• Real estate
• Vehicles
• Valuables
• Bank accounts
• Retirement accounts
• Investments
• Businesses/business interests

Seniors may also need to designate guardianship for any pets they own or children for which they are the primary guardians. Seniors should consider working with an estate planning attorney to ensure they have all the necessary documents and all the wording is correct.

2. Life insurance can provide a financial safety net

According to LIMRA’s 2022 Insurance Barometer Study, the need for life insurance is up 30% for the baby boomer generation. Seniors make up a significant portion of this generation. Life insurance can provide a senior’s partner with a financial safety net. If the policyholder passes away while the policy is active, their beneficiary can receive a death benefit that can help replace their income and pay off debts.

Senior life insurance can also offer wealth-building opportunities. Permanent life insurance comes with a cash value growth component that grows tax-deferred at a specified rate, depending on the policy type.

Seniors can withdraw from or borrow against cash value when it’s large enough. They can also get the full cash value minus surrender charges if they surrender the policy. Finally, having a life insurance policy can help with estate planning. The death benefit is tax-free, helping seniors pass more wealth to their heirs while avoiding taxes.

3. Budgeting is vital

Many seniors no longer depend on a full-time paycheck, so budgeting is vital. First, seniors should list all their income and track their expenses to figure out their budget. Then, they should prioritize expenses they want — such as travel in retirement — while cutting those they don’t care for much.

After doing that, they should keep tracking their spending to make sure they’re sticking to their budget. Adjusting the budget is fine — it can take a couple of months to hone in on a budgeting method that works.

4. Finding income streams can be helpful

Many seniors depend on multiple streams of income in retirement. Retirement savings, investments, and Social Security will be significant, but seniors can seek additional income sources to bolster their financial security.

For example, a senior may start freelancing or consulting part-time in their former field if they enjoy the work. This can be lucrative yet flexible. They could also pick up a side hustle they like, such as rideshare driving.

Seniors may also consider investing in rental real estate to provide steady income. Some seniors downsize their existing homes and use their profits for a down payment on an investment property. Others may take out a loan on their home to purchase another property.

5. Seniors should plan carefully for taxes

Seniors often have more complex tax situations since they have multiple income sources, from Social Security to retirement savings. Consequently, they may need to think harder about taxes. Working with a tax specialist is a great course of action. They can help seniors structure their retirement withdrawals and income streams to minimize taxes owed.

Seniors should also consider their location’s tax rates because each state and city can vary in income, investment, and property taxes. They may consider moving to states with lower tax burdens, but they should also weigh taxes against the cost of living and lifestyle preferences.

The bottom line

Money management is vital at all stages of life. But as seniors enter their golden years, they face new challenges and circumstances. Seniors should start by assessing their assets and creating an estate plan, then see where life insurance fits into the picture. Once they finish these long-term planning steps, seniors should create a budget that prioritizes their desired retirement lifestyle and cuts out unnecessary spending.

Finally, seniors should consider seeking more income streams if they’d like to boost their lifestyle and plan carefully for taxes. Following these tips can help seniors navigate and enjoy this new stage of their lives with minimal financial stress.