As people get older, it can become difficult to manage finances. Some older adults require the assistance of a child, friend or other caregiver to keep their money matters in order. Proper money management involves paying bills on time, keeping track of assets and taking measures to prevent exploitation. Before covering these topics, it is important to introduce some common financial terms.
There are many different types of financial investments, which can lead to confusion. Here are the four most common types of investments:
There are also many different types of retirement accounts. Here are the four most common retirement plans that provide income to retirees:
Generally, an older adult’s income will come from their unique combination of employment income, social security income, pension income, bond interest, dividends and withdrawals from retirement accounts.
Other potential sources of income may be annuities, which are investments offered by insurance companies that pay a set amount of money each month for a specified period of time and reverse mortgages, which provide homeowners with cash in exchange for equity in their home.
With those terms and definitions in mind, let’s cover some strategies for improving money management.
The following are some best practices to follow when paying bills:
The reason for keeping accounts separate and using the same account for each bill is that it simplifies recordkeeping and allows the older adult or their caregiver to track funds easily. For extra organization and security, an older adult can also write down notes about each of their purchases or keep all receipts. The notes may include the reason for the expense, the date of the expense and possibly check number.
Generally, caregivers should not sign checks or other documents with the older adult’s name unless they have financial power of attorney or guardianship. See Legal Guide for descriptions of these legal terms.
An asset is anything with value that is owned, such as property, stocks and retirement accounts. Staying organized and on track with bills and other expenses is the first step in tracking an older adult’s assets. The second step is organizing all important documents in a way that works for both the older adult and any caregivers. This may involve making physical copies of all documents and storing them in a filing cabinet, or it may involve keeping a secure digital shared folder.
The records to keep include the following:
Saving, checking or investment accounts
Payments for utilities or other services
Payments for car loans, home mortgages or personal loans
Pensions, employment, annuities, social security, etc.
Pictures of valuables with estimated values and records or purchase or appraisal
Policies for home, life, health or other insurance
Advance directives, wills and powers of attorney
A variety of government programs offer assistance for older adults who meet certain age or income thresholds. The National Council on Aging offers a simple tool (BenefitsCheckUp) that identifies any programs an older adult may be eligible for. The areas in which assistance may be provided include income assistance, health care and medication cost reduction, food assistance, tax relief and help paying for housing.
Medicare and Medicaid are two government programs that can cover health care costs.
Medicare is meant specifically for those over the age of 65. It pays for short-term and preventative care such as doctor's visits, screenings and hospital stays. It has 4 parts:
An older adult also has the option of purchasing Medicare supplements or Medigap plans, which provide additional coverage around Parts A and B.
Medicaid is meant specifically for low-income Americans. It can cover the cost of long-term care for eligible older adults. It is operated jointly by the federal and state governments, so each state has different rules for eligibility and applying. Medicaid can cover services not routinely covered by Medicare, including:
Most older Americans will at some point require long-term care services, and unless covered by Medicaid, will pay for them out of pocket. To alleviate these costs, long-term care insurance can be purchased that will help cover the costs of long-term services. These policies can range widely in price and coverage, so consult an insurance agent for more detailed advice.
Many financial professionals such as accountants, financial advisors, real estate agents and attorneys can help with financial tasks. Professionals can help with budgeting, financial planning, updating legal documents, managing investments and protecting against financial exploitation, among other things. Consider searching for a local Certified Financial Planner at www.letsmakeaplan.org.
Health professionals may also be helpful in determining an older adult’s risk of financial exploitation. Health conditions that may increase risk of exploitation include dementia, hearing loss, vision problems and depression.