I’m a Financial Advisor: These Are the 9 Worst Money Moves People Make After 70
Ah, retirement. We’re all looking forward to it — but are you prepared to handle your finances as you age? As you enter your 70s, you’ll face many major life transitions that can impact your finances in significant ways. From changes in health and marital status to housing situations and income streams, it’s critical to avoid missteps that can derail your retirement.
Here are nine of the worst money moves people make after age 70, according to financial experts.
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Lending Money to Grown Children or Investing With Them
“One of the biggest mistakes I see clients make after age 70 is lending money to their grown children or lending money in order to invest in a business venture with them,” said Dawn-Marie Joseph, founder of Estate Planning & Preservation. “If you are going to give money away to your adult children, do it with no strings or expectations of it ever coming back to you.”
Delaying Social Security Past Age 70
“Older adults should claim Social Security retirement benefits before age 70. At age 70, delayed retirement credits cease and monthly benefits stop increasing, even if people continue to delay claiming benefits,” said Barbara O’Neill, Ph.D., CFP, AFC, CRPC and author of “Flipping A Switch: Your Guide to Happiness and Financial Security in Later Life.”
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Not Taking Required Minimum Distributions Properly
“Older adults need to start RMDs at age 73 or 75 (depending on year of birth) and calculate them correctly. Otherwise, they could pay a penalty of 25% of the amount that should have been withdrawn but wasn’t,” O’Neill said.
Failing To Plan For Higher Taxes
“Some older adults have multiple streams of income, especially after required minimum distributions (RMDs) begin. This can result in higher tax bills in their 70s than they paid previously and, perhaps, a higher marginal tax bracket,” O’Neill noted. “Strategies like Roth conversions and qualified charitable distributions (QCDs) can help reduce taxes.”
Make sure to have all of your financial ducks in a row — either by figuring it out yourself with the help of a loved one or hiring a professional.
Hoarding Rather Than Spending Savings
O’Neill said financial advisors should ask clients nearing the end of their lives: “If you don’t spend your money, who will?” Many struggle with decumulating assets they’ve spent decades accumulating.
Instead of hanging onto everything, make sure to enjoy what you have.
Not Planning For Diminished Capacity
“The risk of mild cognitive impairment (MCI) or dementia increases with age and accelerates rapidly in the mid-70s. By age 82, the chance of MCI or dementia is over 50%,” O’Neill said. “Therefore, a thorough estate planning review is warranted.”
Make sure you’re prepared for these things so that you and your loved ones don’t have to deal with it when it’s too late.
Avoiding Hard Conversations With Loved Ones
“Many people put off conversations about ‘hard topics’ — e.g., dying, feeding tubes, care-giving expectations, bequests in a will — for decades. One’s 70s are the time to open up with family members and personal representatives,” O’Neill advised.
Although it might be difficult to talk about death, it is a natural part of life and ensuring your finances are in order beforehand can save your loved ones a lot of pain.
Neglecting Long-Term Care Planning
“At age 70-plus, LTC insurance is prohibitively expensive or may be unavailable due to health issues,” O’Neill said. Without a plan, 70-somethings may be forced to sell assets, lean on family or qualify for Medicaid.
If you can, look into life insurance way before you hit your 70s so that you are prepared to deal with what comes next.
Failing To Hedge Against Inflation
“Without some money invested in stocks, or stock mutual funds or ETFs, the purchasing power of retirement savings will decrease over time,” O’Neill warned. “Cash assets and many bonds cannot keep pace with inflation over time.”
Make sure to get all of your investments in order before you enter retirement age so you have enough money to enjoy your golden years.
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This article originally appeared on GOBankingRates.com: I’m a Financial Advisor: These Are the 9 Worst Money Moves People Make After 70
