Financial Planning for Seniors in 3 Easy Steps

Header image for article about financial planning for seniors, showing an older man with money in his hand.

Retirement planning isn’t fun for most people. Unfortunately, it is important for everyone. For senior citizens, proper financial planning can mean the difference between a comfortable retirement and experiencing financial hardships later in life.

Financial planning for seniors might seem scary at first, but knowing how to get started can make the process much more manageable.

Step #1 – Determine Your Needs

Before you can start taking concrete steps toward building a nice retirement nest egg, you will first need to determine what your financial needs are.

80% Rule

The rule of thumb for retirement planning is the “80% rule.” This rule means that you should expect to need 80% of what you earn before retiring each year. For example, say you make $100,000 annually. You should plan so that you can live on an $80,000 retirement income each year.

Of course, the 80% rule doesn’t cover everything. For example, you could very well need more money each year if you receive a diagnosis of a chronic illness or debilitating health condition. The 80% rule, in short, just helps you get started, but you will need to fine tune how much you save based on your unique financial situation.

Health Problems

According to Genworth, healthcare costs in this country continue to increase, and roughly 70% of people will require long-term care at some point. These facts mean that you have to factor potential health problems and fees associated with caregiving services into your retirement budget.

Life Expectancy

The 80% rule can help you determine how much money you need each year, but it doesn’t tell you how many years you’ll be retired. Life expectancy plays a crucial role in determining how much money you need to retire comfortably. After all, if you retire at 65 and live to 85, you’ll need your retirement savings to last you for 20 years. That’s vastly different than if you retire at 65 and live to 70.

There is no way to know with certainty how long you will live after you retire. You can make an educated guess, however. Those who are interested in learning more can use the Social Security Administration’s (SSA) Life Expectancy Calculator to get a rough estimate of their life expectancy.

Step #2 – Start Saving

Once you’ve determined your retirement goals, it’s time to actually start saving. There are plenty of routes to do just that, including the following.


A 401k is an employer-sponsored pension account. With a 401k, employees can put aside a certain amount of their paychecks, either before taxes (traditional 401k) or after taxes (Roth 401k), towards a retirement account. The employer will match the employees’ contributions up to a certain amount. The money in a 401k doesn’t stay stagnant, though; it grows as it is invested in stock, bonds, and more.

One-participant 401k plans are also available for the self-employed.

Savings Accounts

401k plans are great, but they come with plenty of risk since they are built upon investments. That’s why it’s a great idea to have a dedicated retirement savings account in addition to a 401k. This way, you can have funds to fall back on should something ever happen to your 401k.

Of course, not all savings accounts are created equal. An individual retirement account (IRA), for example, is specifically designed to help people save for retirement.

Government Programs

The US federal government offers several programs that provide financial assistance to the elderly. While people typically cannot enroll in these programs until they are in their 60s, it’s important to know what major programs are available and what benefits they provide.


Medicare is a government health program for senior citizens (65+) as well as some people with disabilities and end-stage renal disease. It’s one of the largest and most popular public health programs in the United States.

There are various “Parts” to Medicare, and each part covers a different subsection of healthcare costs. Original Medicare, for example, is made of Parts A (hospital insurance) and B (medical insurance). People can add different Parts to their Medicare plan, such as Medicare Part D (prescription drug coverage).

Unfortunately, Original Medicare doesn’t cover long-term care costs, such as stays in nursing homes exceeding 100 days, according to This fact means that people wanting long-term care coverage will have to rely on resources besides Original Medicare.


Medicaid is a state and federal health insurance program for low-income, disabled and older US citizens and qualified non-citizens. What Medicaid covers and how much assistance it provides varies from state to state as well as the individual’s needs.

Social Security

The SSA administers Social Security, which provides recipients with benefits in the form of annuities. The program, especially in the form of supplemental security income (SSI), may help cover long-term care costs.

Despite what many people think, money paid into Social Security doesn’t go into marked retirement accounts. Instead, people who work pay taxes into the Social Security system. The system then distributes that money to beneficiaries in the form of a monthly fixed income.

Long-term Care Insurance (LTCI)

Healthcare costs for seniors are on the rise, and many government programs that seniors rely on, like Medicare, do not offer adequate financial assistance for long-term care. That is why it often pays—literally—for many older adults to invest in long-term care insurance (LTCI).

Companies that offer LTCI include:

  1. Bankers Life & Casualty
  2. MassMutual
  3. Mutual of Omaha
  4. New York Life
  5. Northwestern Mutual

Estate Planning

Part of retirement planning unfortunately means planning for what comes after retirement. No one wants to think about becoming incapacitated or passing away, but not planning for these events (aka estate planning) means that the burden of dealing with them falls to your family members. That presents them with not just emotional challenges, but financial and legal ones as well.

No one wants that.

Help your loved ones avoid those obstacles by planning ahead. Some of the most important aspects of estate planning are:

  • Getting life insurance,
  • Establishing power of attorney, and
  • Setting up your final will and testament.

A lawyer or qualified financial advisor can help you correctly prepare these documents.

Step #3 – Seek Outside Help

A little help can go a long way to simplifying financial planning.

Financial Counseling

Complicated legalese can bog down financial documents, making them difficult for the layperson to navigate. That’s where a financial advisor can help. These experts can read between the fine lines and help you choose the right documents, investments, and more to square away your estate and make investments that can boost your retirement accounts.

Just be careful: there are people who claim to offer financial services that are not certified. At best, that means they’re unable to actually help you do what you need to do. At worst, it means they’re trying to rip you off!

Avoid that by checking that any prospective financial advisor is certified.

Types of Financial Advisors

Types of financial advisors (and their credentials) include:

  • Certified Financial Planners (CFPs) – experts in areas like retirement and estate planning, certified by the Certified Financial Planner Board of Standards, Inc.
  • Chartered Financial Analysts (CFAs) – investment analysts, certified by the CFA Institute
  • Personal Financial Specialists (PFS) – certified public accountants (CPAs) who have received Personal Financial Specialist credentials from the American Institute of Certified Public Accountants (AICPA)

When to Start Retirement Planning

The truth is, it’s never too early to start planning for your retirement years. Of course, the opposite is also true: it’s never too late to start planning for retirement, even if you’re already a retiree!

That said, the “ideal” time to start financial planning is during your 20s. During this time, many people start earning steady incomes, which means they have decades to build their retirement funds.

The Importance of Money Management and Financial Literacy

A financial nest egg can only do so much; knowing how to budget and manage money can mean the difference between living comfortably in retirement and running out of funds early.

Budgeting Worksheet for Seniors

Making the adjustment to living on a limited income can be difficult, which is where visual budgeting comes in handy. A budgeting worksheet, such as this one offered by AARP, helps many people live within their means.

Financial Fraud

Part of being financially literate means knowing how to spot scams. Unfortunately, senior citizens are frequent targets of financial abuse, as scammers believe that they are easier targets that have a large retirement nest egg.

That’s why seniors must take active steps to prevent theft of money and other sensitive financial information. These steps include:

  • Never signing blank forms, including insurance claim forms
  • Avoiding salespeople who offer free or reduced medical equipment or services
  • Closely guarding credit card information
  • Not giving insurance, Medicare/Medicaid, Social Security, or other identification forms to anyone but medical service providers (such as the receptionist at your doctor)

Financial Landscape for Seniors

In order to understand the urgency of financial planning, you simply need to take a look at the current financial situation of seniors in the United States.

Many Boomers are Still Working

In 2018 alone, 29% of Boomers between the ages of 65 to 72 were working or looking for work, according to Pew Research Center. For context, only 21% of the Silent Generation and 19% of Greatest Generation were working or looking for work at the same age.

Millions of Seniors Live in Poverty

According to a Congressional Research Service (CRS) report, 4.9 million seniors (those aged 65+) lived in poverty in 2019. Poverty rate only increases with age. People aged 80 and older are more likely than any other age group to live below the poverty line, with the poverty rate for this group reaching 11.1%. That’s roughly 1 in 10 seniors, for context.

Healthcare and Senior Living Costs are Rising

Healthcare and senior living costs in the United States are on the rise. According to Genworth’s 2020 “Cost of Care Survey,” annual senior living costs have changed significantly from 2019 to 2020:

  • Semi-private room: up by 3.24%
  • Private room: up by 3.57%
  • Assisted living: up by 6.15%
  • Homemaker services: up by 4.44%
  • Home health aide: up by 4.35%
  • Adult day health care: down by 1.33%

Except for adult day care services, the prices of all other major categories in the survey increased. Even though adult day care prices dropped between 2019 to 2020, the annual median cost of these services across the United States was still a hefty $19,240.

These statistics seem to paint a grim picture, but proper planning can mean a much more optimistic outcome. While it’s impossible to plan for everything, it is possible to craft a well-rounded financial plan that can give people peace of mind that their financial situation will largely be secure by the time they retire.

Final Thoughts

No one likes to think about retirement planning or even planning for what comes after. Doing so can mean the difference between a comfortable retirement or facing financial difficulties later in life, however.

While financial planning might seem impossible, the process becomes easier to manage when broken into these 3 simple steps:

  1. Determine your needs
  2. Start saving
  3. Seek outside help

With these steps in mind, it’s easy to get started on your retirement planning journey.