According to the National Council on Aging, over 15 million older Americans are financially insecure. Older adults tend to struggle with rising costs of healthcare, housing, food, transportation, and other basic necessities.
Experiencing financial difficulties in retirement is all too common among today’s older adult population. Organizations like NCOA are fighting to help these seniors access benefits, find jobs, and better manage their finances for a better quality of life. However, a large percentage of the senior population does not have access to this kind of assistance. With that in mind, we want to do our part by educating retirees on how to overcome financial difficulties in retirement with realistic and actionable strategies, which we will talk about in this article.
Job loss and job insecurity
Many retirees don’t expect to return to the workforce after they take their leave. However, adverse life events can lead them to need employment in order to remain financially stable. If you are in the same boat, returning to work can pose quite a challenge, mainly due to your age and the lack of opportunities.
First, try to find employment on your own. There are plenty of job portals online that you can use to apply, so take full advantage of them. Ask your family or your local community center for help in creating your online profile and digital resume, if needed. If possible, aim for work-from-home positions so that you can earn money from the comfort of your own home (which can also save you food, clothing, and transportation costs).
If you get no such luck, reach out to senior employment programs such as The Senior Community Service Employment Program (SCSEP) by the Department of Labor, which offers job training, job search services, and on-the-job training to adults as young as 55. To find out more about this program, contact the nearest SCSEP office or call the toll-free help line at 1-877-US2-JOBS (1-877-872-5627).
It may also be possible to return to your previous employer. One big advantage of returning to your former employer is familiarity: you no longer have to learn the ropes, and you are already familiar with the workplace culture. It might be a little hurtful to your pride to come back to your previous place of employment, but it might be an easier option than finding a new job altogether.
With a fixed income, it can be difficult to cover all your basic needs, including healthcare, housing, food, medicine, and utilities. Fortunately, there are many government programs that aim to alleviate the financial burden on the elderly, especially those who belong to the low-income sector.
The NCOA helps older adults gain access to government benefits, such as healthcare assistance, food assistance, caregiver support, and many more. Reach out to the nearest NCOA office to see which programs you are eligible for. You can also use this tool to find patterns and programs that are nearest to you.
If you are old enough to qualify for senior discounts, ask for them wherever you shop or acquire services from. Most restaurants, grocery stores, clothing shops, and other establishments offer discounts to the elderly–even when they don’t advertise it. Service-based businesses like hair salons, auto shops, and repair companies may also offer discounts if you ask for them.
Every little bit of money that you can save from a bill helps, so don’t be afraid to ask.
The biggest benefit of downsizing–especially for financially challenged seniors–is reducing your housing, maintenance, and utility costs. A smaller home is generally less expensive to buy and maintain. There is also less space to heat, cool, or light up, which means you also get to save a lot of money on utilities compared to living in a bigger house.
If you don’t have the money for a down payment to buy a new home, here are several options you can consider:
- HECM for Purchase. HECM stands for Home Equity Conversion Mortgage. It is a type of reverse mortgage insured by the Federal Housing Agency (FHA) which allows you to borrow against the equity in your home. A HECM for Purchase (H4P), on the other hand, is a type of loan that allows you to use the proceeds to buy an eligible home.
You have to be at least 62 years old to qualify for a HECM or H4P, and you have to have substantial equity in your home. Unlike other types of loans, the loan does not become due until you pass away, sell the home, or move away permanently. This means that aside from having the funds to downsize, you also eliminate your mortgage payments for the rest of your life.
Are you interested in learning how much you can qualify for? Get Started.
- Bridge loan. A bridge loan is a short-term loan that can be used to buy a new house, which can then be paid back when you sell your old home. This is a viable option when you have no other means of putting money down on your new home.
- Borrow from family or friends. If you have someone willing to let you borrow money for a down payment, it is possible to enter into a loan agreement with them secured by a second mortgage on the new house (deed of trust). Once you sell your old house, you can start paying that individual back.
However, take note that some lenders may not approve a loan when the down payment doesn’t come from your own pocket.
Downsizing also gives you the opportunity to sell off unused appliances, furniture, and other belongings. Doing so can line your pockets with extra cash that you can use to pay off other expenses or increase your cash reserves. If you have more than one car, sell the older or less fuel-efficient one.
Unlike the previous example, tapping into your home equity doesn’t have to involve moving somewhere else. Your home is likely your largest asset, which means that it can be the biggest source of financial relief if you play your cards right.
A reverse mortgage is a viable option if you are at least 62 years old and have built sufficient equity in your home. Taking out this type of loan allows you to access your home equity (through a lump sum payment, term payments, or a line of credit) and eliminates your future mortgage payments while allowing you to keep ownership of your home. Keep in mind that you are still required to pay for homeowner’s insurance, taxes, and maintenance.
Furthermore, the loan does not become due until you pass away, move away permanently, or fail to keep up with loan obligations.
Another option is a cash-out refinance. This type of loan replaces your current mortgage with a new one and allows you to keep the difference for whatever purpose you have in mind. It is also a popular choice for homeowners looking to lower their interest rates or switch from a fixed-rate mortgage to an adjustable-rate mortgage. But unlike a reverse mortgage, you will have to repay a cash-out refinance loan after a certain amount of time. If you’re not done paying off your mortgage, the loan repayments may be an unwelcome expense on top of the mortgage.
Want more program details? Download a FREE Reverse Mortgage Toolkit.
Sometimes, financial difficulties in retirement can stem from lifestyle choices. Unless your income is simply not enough to meet your basic needs, you might be due for some lifestyle modifications.
For example, if you tend to eat out often, you are likely spending more than you need to on food. Cooking at home is far less expensive and often healthier than eating out at restaurants or buying takeout. If you have trouble cooking by yourself (or simply do not enjoy cooking), seek assistance from loved ones to help you prepare your meals for the week, which you can then reheat during meal times.
Another example is entertainment. Keeping yourself occupied does not have to break the bank. There are plenty of entertainment options that are free or low-cost; you just have to look for them. For instance, many senior community centers offer free classes, social clubs, and even tickets to movies, museums, and plays. If your local community center has such programs, take full advantage of them.
Smoking and drinking are two unnecessary lifestyle habits that do not only cause harm to your health, but can also take a significant chunk from your budget. If you indulge in either or both, there is no better time to stop. Speak to your doctor about different methods of treatment to safely reduce your alcohol and cigarette usage.
Alternative streams of income
Going back to work is simply not an option for some retirees. A lot are deemed unemployable by today’s current standards, while others do not have the resources to attend work every day (no car, no available public transport, no one to help them around the house, etc.). On the flip side, there are plenty of ways you can increase your retirement income without taking an actual job.
Here are some ideas that you might find useful:
- Tutoring. Teaching youngsters is a rewarding experience in and of itself. At the same time, it is relatively easy to do for seniors such as yourself, especially if you have experience working with children.
- Small business. From candles to baked goods, seniors can use their hobbies and skills for extra income. If you create something sellable, try finding a market within your local community (sell to your friends, join the farmer’s market, partner with local businesses, etc). Then, once you gain traction, consider exploring the online seller sphere.
- Services. Freelancing is very common nowadays, and it’s relatively easy to find potential clients online. Services like proofreading, copywriting, and custom art can help you earn extra cash on the side with only a computer and your skills as capital.
- Housekeeping. Your neighbors, family members, or friends may have trouble keeping up with housework, so why not offer your services? Aside from helping you stay physically and mentally active, doing housework is a quick way to earn extra money.
- Babysitting. Similar to housekeeping, your target market for babysitting will likely be the people closest to you. Instead of babysitting for free, ask for a small sum in return for watching over their little ones.
Financial difficulties are–unfortunately–very common amongst the senior population. If you are experiencing the same hurdles, there is no shame in asking for help–be it from your family and friends, the government, your neighbors, or your local community centers.
For more retirement tips, visit our learning center here.