Emergency Funds Become Increasingly Important In Retirement by Elliott Hollander
If your car broke down or you had an unexpected visit to the hospital, would you have the money to cover the expense? If you answered no, you’re not alone. According to a recent report, many Americans would have trouble coming up with the money to pay for a $1,000 emergency, and this is true across all income levels.
The majority of households earning less than $50,000 would have trouble paying the unexpected bill, whereas two-thirds of those earning between $50,000 and $100,000 would have difficultly. Even 38% of households earning more than $100,000 year would have at least some trouble coming up with $1,000. This means a lot of Americans would be unable to pay for a medical emergency or unexpected home repair.
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While emergency funds are necessary at every stage of an adult’s life, they’re even more important in retirement. Seniors need a larger emergency fund after retirement than what they might have kept in their younger years. There are more emergency-like events during one’s senior years, and without an emergency fund, retirees would need to withdraw money from their retirement accounts, which could cause issues down the road.
In their retirement years, seniors are relying primarily on their retirement fund, Social Security, and pensions. Instead of maintaining a contingency fund of a few months’ salary, retired seniors should aim to save up more, in the event that they need personal or medical care down the road. But, while it’s more difficult to save when you don’t have money coming in, it’s definitely possible to do so. Here are some ways seniors can build a healthy emergency fund.
Assess Your Taxes
Many retirees are paying extra in IRA, 401(k), and Social Security taxes without even realizing it. Retirees aged 70 ½ or older are required to take the minimum distribution. Once you reach that age, take that money and put in it into a non-taxable contingency fund.
Downsize Your Home
If you live in a large home, downsizing at retirement can help you make money on your investment, while saving on costs like upkeep. Also, you may be living in a more expensive area where you are paying more for taxes, insurance, groceries, and gas. To save money, consider moving to a less expensive area that offers the same comforts and amenities you need, but for a more affordable cost. While many seniors choose to age in place, many others are making the move to senior living communities, as they can provide cost savings with a more carefree and luxurious lifestyle. Also consider ditching the landline phone and cable for a pay-as-you-go cell phone and internet-streaming TV service like Netflix or Hulu.
Get Rid of the Extra Cars
It’s not uncommon for American households to own several cars. Typically each person in a household owns thier own car, and a personal vehicle is often deemed necessary for commuting to work. But, in retirement you no longer have a commute, and you’ll likely be driving less as you age. If your household has multiple cars, consider getting rid of the extras. Not only will you have money to add to your emergency fund, but also you’ll save on gas, car insurance, and vehicle repairs and maintenance. One vehicle should be doable for you and your spouse. You can also utilize public transportation and the transportation services offered by your retirement community.
Earn Money Doing Something You Love
Many retirees find enjoyment in taking a part-time job. A part-time job, such as consulting, freelance writing, or teaching, can help seniors stay active doing something they love, while earning some income.
Maintaining an emergency fund is very important in retirement, as retirees don’t have a steady stream of income. With these tips, seniors can be proactive about saving and be protected in the event of an unexpected emergency.
Elliott Hollander is the founder and CEO of SilverFox.care, an online platform helping families find the perfect senior living residence for their loved one. Silver Fox simplifies the search for senior living communities by connecting families to the options that suit their unique needs, preferences, and budget. Learn more at www.SilverFox.care.