9 Worst Financial Mistakes Seniors Can Make This Year

Many current or soon-to-be seniors on a fixed income have to be very cautious with their money, or potentially face a situation of outliving retirement savings and finding themselves in a deep pickle.

One such way to avoid running into trouble is to regularly do a personal audit to identify any unnecessary expenses or over-spending that may have crept up over time. After all, lots of little expenses quickly add up to big chunks of money. And overspending in retirement (even if by accident) can drain the bank account fast... leading to a potential stressful situation with no way out during your retirement years.

That's why we put the list below together, which can help identify and plug a leaky bank account...

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#1 - Not Moving to Safer, More Conservative Investments

Once in retirement, it's much harder to recover from large negative swings in savings. Financial advisors often recommend a long term strategy and many times suggest leaving money in the market regardless of the ups and downs. But that's because over time the market, while very volatile at times, has historically ended up increasing in value over the long term.

In retirement, however, investors have to think more short term. They may not have the ability to wait 5-10 years for the market to recover... especially when on a fixed income and access to cash is needed regularly.

Depending on your time-horizon and personal situation, it may be prudent to keep keep some money in more aggressive growth investments, but in most cases it is wise to focus more on protecting capital rather than growing it in retirement.

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#2 - Born Before 1965? Take $3,120/Year Off Your Mortgage With the New "Enhanced Relief" Program

If you're a homeowner, failing to do this one thing could end up costing you thousands of dollars this year...

Congress recently replaced HARP with a new government program called the Freddie Mac Enhanced Relief Refinance (FMERR) initiative. This program is designed to help the average American homeowners reduce mortgage payments by an average of $3,120/year (or $260/month).

There's no telling when the program could expire, so it's crucial that homeowners visit the free Enhanced Relief website to check if they qualify right away.

Homeowners that owe less than $625,000 on their home may qualify for the FMERR option. It's hard to believe this program exists, but after HARP helped more than 3.3 million U.S. households reduce their mortgage, the government had to step in with a replacement.

So if reducing your payments by $260/month, paying off your mortgage faster, or even taking some cash out would help you, it's important to check your eligibility right away. It's quick and completely free!

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#3 - Seniors Without Life Insurance Get $1,000,000 Coverage Tax-Free

Unfortunately with every year you age your insurance premium amount rises 8-10%. For some, rising life insurance policy costs can add up significantly. And what's worse is the fact that many have a hard time qualifying for new policies altogether once they reach a certain age.

Fortunately though, there is a way to get a very cheap life insurance policy. You need to compare quotes from multiple insurance companies. This amazing website will let you do that and the best part it is totally free!They will run your information through their technology to automatically find the best life insurance policies available for a much much lower price. You could end up saving up to 70% on life insurance!

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#4 - Applying for Social Security Too Early

Just because someone is eligible to apply for Social Security does not necessarily mean they should. Those who start taking benefits at age 62 will get you about 25% less than those who claim in the full retirement age of 66. You will also get 32% less than if you wait until age 70.

Those who have the means to pay their bills without social security benefits may want to delay their application for retirement benefits a few more years. The benefit increase is maxed out by 70 years old and will not increase any further, so that may be the target age to shoot for.

Here are some things to consider when determining the best time to start taking benefits...

Employment Status: Are you still working and bringing in an income?
Health Status: If you are fearful that you may have a shorter lifespan than your peers, it may make sense to take your retirement benefits as early as possible.
Marital Status: If one spouse has contributed far less to Social Security than the other, the greater-contributing spouse may want to wait longer to claim benefits. If the higher-earning spouse were to pass away first, the survivor can claim the spouse's full benefit.
Dependents Status: Your family's survivors benefits will be reduced if you claim early retirement benefits. However, your family's spousal or dependent benefits won't be decreased if you claim early retirement benefits.

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#5 Owe More Than $10,000 in Tax Debt? Seniors Can Get a Fresh Start

Seniors who owe unpaid taxes don't need the burden of increasing interest payments every month. But the IRS may not want you to find out about alternatives.

For anyone with more than $10,000 in unpaid taxes, this Fresh Start Program could significantly reduce or even forgive the amount owed to your State or the IRS. The program can resolve tax debt without a loan, and many have used the program to promptly relieve the fear of liens, garnishments, penalties or even imprisonment.

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#6 - Overpaying for Monthly Auto Insurance? Claim These Senior Discounts

Did you know that depending on your age and other factors you could get a huge discount on car insurance? Recent studies indicate that only 5% of American drivers over the age of 55 are paying less than $50 per month for car insurance. That is probably because they are not taking advantage of the multiple discounts available to them.

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#7 - Paying Too Much in Taxes

Not being tax effective with retirement savings and investments can be one of the biggest burdens that can be easily avoided with just a little planning and strategy. Having multiple retirement accounts may sound ideal but keep in mind that each retirement account may be taxed differently. If you do not find a way to take out your money from your assets and your accounts in the ideal manner, you could end up paying more taxes that you actually have to.

...And nobody likes to pay more taxes then they have to. Especially in retirement, after already paying a lifetime of taxes and certainly your fair share.

Finding the most cost-efficient way of being taxed during retirement can be a complicated manner, so be sure to consult with a trusted financial planner to help you along the way.

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#8 - Paying Out-of-Pocket for Home Repairs — Never Do That Again!

Unexpected home repairs can be catastrophic to the finances of seniors on a fixed monthly budget. Unfortunately home insurance will not cover the refrigerator, stove or washing machine breaking down unexpectedly. Same goes for your heater in the winter or AC unit in the summer. If any of these items break, it can run hundreds or even thousands of dollars.

This is why so many homeowners have taken such an interest in this Home Warranty Program that supplements homeowners insurance. It can end up saving thousands by protecting unexpected home repairs. The AC, furnace, appliances, roofing repairs – they're all covered! If there's something they can't fix, they just replace it!

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#9 - Over-Supporting Adult Children

This may be a sensitive subject for some, and could even be a point of personal conflict between married couples in retirement...

Family is often hard to refuse, but your savings are fixed for the most part and your ability to earn back money taken from savings is greatly diminished in retirement. Whereas your children, as much as you want to help them, are generally much better equipped to recover from financial difficulties. They have time working in their favor, where retirees do not.

Unless you are really sure you have the money to spare, it is best to avoid giving large monetary gifts or loans, especially if you are already out of the work force. It may also be helpful to remind your children of your current situation and what living on a fixed income in retirement is like. After all, if you run out of money the burden will likely fall on them -- so it is in their best interest to understand.

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Disclaimer:

The information provided on this blog is for informational purposes only. It is not intended to be, nor does it constitute any kind of financial advice. Please seek advice from a qualified professional prior to making any financial decisions based on the information provided.

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