7 Financial Planning Tips for Seniors

1. Update Your Financial Goals

Your financial goals will probably look different when you’re no longer working. During this phase of your life, you may want to:

• Travel more
• Move to a different home
• Retire abroad
• Take up new hobbies
• Provide financial support to your children or grandchildren, like paying a portion of their school tuition or helping them get a business off the ground

The first step is to clarify your financial goals and estimate how much each one will cost. You can then make a plan for drawing on your nest egg in the most efficient way possible. A financial advisor can offer personalized guidance and help minimize your tax burden.

2. Clarify Your Costs

Most retired seniors are on a fixed income, which is why it’s important to understand your expenses. That includes:

• Essential costs: This includes your rent or mortgage, utility bills, food, debt payments, phone bill, gas and other necessities.
• Discretionary spending: These are the “nice to haves,” like eating out, shopping, golfing, traveling and other nonessential costs.

Now factor in those financial goals we talked about earlier. And don’t forget about expenses that may increase in retirement, such as housing and medical costs (more on this below).

Looking at it all together can help you clarify your expenses now and in the future. If your nest egg is stretched thin, you may have to reevaluate your costs or adjust your goals.

Learn more >> How Much Will You Spend in Retirement?

3. Plan for Health Care Expenses

According to Fidelity Investments, the average 65-year-old retired couple could need roughly $315,000 for health care costs in retirement. Medicare, available for folks who are 65 and older, doesn’t cover everything. Seniors are still on the hook for premiums, deductibles, copays and other out-of-pocket costs. Your expenses will likely be higher if you retire before you’re eligible for Medicare. Long-term care, if needed, could also amount to a big expense.

If you have a health savings account (HSA), you can make tax-free withdrawals to cover qualified medical expenses. You can also connect with a financial professional to help you find creative ways to cover potential health care costs. Moving assets into an irrevocable trust, for example, might allow you to qualify for Supplemental Security Income (SSI) or Medicaid.

4. Manage Your Budget

Budgeting is always important, especially if you’re on a fixed income or are nearing retirement. Begin by listing out all of your income sources. If you’re retired, that may include:

• 401(k)s and individual retirement accounts (IRAs)
• Pensions
• Social Security benefits
• Annuities
• Cash value that’s accumulated in a permanent life insurance policy
• Passive income from investment properties or stock dividends

You’ll want to be strategic about how you draw on your savings, as it could create a significant tax bill. (We’ll unpack this shortly.) In terms of day-to-day spending, you can look for senior discounts on car insurance, travel, groceries, restaurants, trips to the movies and more. Using a budgeting plan or app can help you live within your means.

Learn more >> How to Make a Retirement Budget

5. Don’t Forget About Taxes

If you pull money from a tax-deferred retirement account, like a 401(k) or traditional IRA, it’s considered taxable income—and taking large distributions could trigger a substantial tax liability. In some cases, it could even push you into a higher tax bracket.

Diversifying your income in retirement can help you keep more of your hard-earned money. That might mean combining funds from a tax-deferred account and a Roth account. (The latter offers tax-free withdrawals.) Just keep in mind that you’ll need to start taking required minimum distributions (RMDs) from tax-deferred accounts beginning at age 73.

Tax Perks for Folks Who Are 65 and Older

• An additional standard deduction: In 2024, that’s an extra $1,950 for single taxpayers and $1,550 for married couples filing jointly.
• Social Security tax exemption: If you’re an individual taxpayer, you don’t have to pay federal taxes on your earned income if the total is $25,000 or less. (The total includes 50% of your Social Security benefit, along with any other earned income.) For married couples filing a joint tax return, the threshold is $32,000.
• Elderly tax credit: Taxpayers who are 65 and older and meet certain income requirements can secure a tax credit between $3,750 to $7,500.

6. Update Your Estate Plan

Estate planning involves organizing your assets and making a plan for how you’ll distribute them after you’re gone. That may prompt you to:

• Update your will: This is a legal document that communicates your final wishes. You’ll name an executor to carry out your directions for distributing your assets.
• Choose power(s) of attorney: This allows you to appoint someone else to make medical and health care decisions on your behalf if you become unable to advocate for yourself.
• Establish trusts: This can help your loved ones avoid the probate process. You can also distribute trust assets during your lifetime if you choose.

7. Avoid Scams That Target Seniors

There’s no shortage of scammers who go after seniors—and fraud losses can be especially devastating to folks who are on a fixed income. In 2023, the average victim of elder fraud senior scams lost over $33,900, according to the FBI. Many of these scams involve an impersonator who pretends to be someone the victim trusts. Below are some tips for avoiding senior scams:

• Never share your personal information, especially with someone who contacts you saying they’re a government official or bank representative. These fraudulent calls and emails often have a sense of urgency.
• Protect your accounts with multifactor authentication.
• If you’re suspicious about a phone call or other contact, take some time before responding. Contacting a friend or family member can help you assess the situation.
• If you’re tricked into giving money to a scammer, report the fraud to the Federal Trade Commission (FTC) at ReportFraud.ftc.gov. You can also check out identity theft protection from Experian, which monitors your credit reports for possible identity theft and alerts you of suspicious activity.

The Bottom Line

Financial planning doesn’t end when you reach retirement. Budgeting, paying taxes and working toward financial goals are lifelong habits. The same goes for protecting your credit. However, seniors have unique planning needs that may necessitate the help of a financial professional.