Basics of Financial Management for Older Adults

Basics of Financial Management for Older Adults

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:

  • Bonds allow investors to pay money to the government or large organizations that will be repaid in full with interest. Bonds are offered at a specific price with a defined interest rate and timespan over which repayment will be made.
  • Stocks are shares of ownership in a company. Owners of stocks are shareholders. Some companies reward shareholders with additional income quarterly or annually in the form of dividends.
  • Mutual funds are collections of bonds, stocks or both which pool the money of many investors.
  • Certificates of deposit (CDs) are purchased at banks to earn interest on money that will be deposited for a set amount of time, like 1 year or 3 years.


There are also many different types of retirement accounts. Here are the four most common retirement plans that provide income to retirees:

  • Pensions provide a set amount of income each month to retired workers. The amount depends on the retiree’s work history and earning history.
  • Social Security is a governmental program that provides monthly income to retirees or spouses of deceased retirees based on lifetime earnings and retirement age.
  • Individual Retirement Accounts (IRAs) are investment accounts meant to fund retirement. Common examples are Roth IRAs and Traditional IRAs, each having contribution limits and rules for withdrawals.
  • 401(k)s and 403(b)s are investment accounts offered by employers into which employees traditionally deposit part of their paycheck each month for retirement.


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.


Bills and Expenses


The following are some best practices to follow when paying bills:

  • Avoid creating joint accounts, keep the older adult’s finances separate and in their name.
  • Use the same debit or credit card to pay all recurring expenses, rather than cash.
  • Use the same account to cover all recurring expenses.


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.


Tracking Assets


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:

  • Account statements

Credit cards

Saving, checking or investment accounts


  • Bills paid

Payments for utilities or other services

Payments for car loans, home mortgages or personal loans


  • Income received

Pensions, employment, annuities, social security, etc.


  • Insurance documents

Pictures of valuables with estimated values and records or purchase or appraisal

Policies for home, life, health or other insurance


  • Legal documents

Advance directives, wills and powers of attorney


Financial Benefits Programs


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, Medicaid and Long-Term Care Insurance


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:

  • Part A covers hospital stays, short-term nursing home care, hospice care and short-term home health care. Most older adults are automatically enrolled in Part A and do not pay a premium as long as Medicare taxes were paid while working.
  • Part B helps pay for doctor visits, medical equipment like walkers or wheelchairs and preventative screenings. Part B costs a monthly premium and older adults can opt out.
  • Part C, or Medicare Advantage Plans, are paid for out of pocket and typically include all the benefits of Parts A and B plus added coverage for prescription drugs and routine vision or dental care. These plans are offered by private insurance companies.
  • Part D is optional and helps pay for prescription drugs. It is offered by private companies approved by Medicare.


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:

  • Personal care, such as paid help with bathing, eating and dressing.
  • Long-term care in a nursing home or at home.


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.


Professional Assistance


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.