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  • Writer's pictureHarry N. Stout

270-The Seven Financial Challenges of Aging

This is a good news post — you are likely to live longer than your parents. Medical, diet, exercise, and technological breakthroughs will improve the length and quality of your life.

Yet there is a dark side to this good news. Most of us, using our parents or grandparents as models, have an incredibly unrealistic view of what our financial needs will be when we retire. Previous generations lived 10 to 15 years into retirement.

Today the average male can expect to live 17 years past his 65th birthday, and the average female over 20 years! Our parents and grandparents saved money during their working years, received Social Security and pensions, lived modestly, and usually died with enough assets to leave an inheritance. This model is woefully out of date.

Today, Americans face seven financial challenges in paying for their increasing life expectancies. They are:

  1. Healthcare costs

  2. Automobile insurance costs

  3. Funding longer life expectancies

  4. Retirement and savings distributions

  5. Estate planning considerations

  6. Having enough death benefit protection

  7. Having enough income protection

Let’s review each of these challenges in detail.

1. Healthcare

As they grow older, many people fear hospitalization. Not only because of failing health, but also because they are afraid that their medical insurance won’t cover their costs. Most people don’t understand the Medicare/Medicaid programs until they need them. Knowing about the deductibles and coverage gaps will help you in your retirement planning. Research both programs and become familiar with what they do and do not cover.

This healthcare challenge also includes understanding long-term care or nursing home insurance. For many people, securing some amount of long-term care insurance is part of a smart retirement plan. Consider buying these policies when you are young (i.e., age 50) and healthy when premiums are lower.

2. Automobile Insurance

The right to drive and the cost and availability of auto insurance are emotional subjects for many retirees. There is an ongoing struggle between people who want older people to give up their licenses, and seniors who want to continue to drive. If you continue to drive into your senior years, your auto insurance rates will probably increase dramatically. Why? Because accident rates increase with age, starting at about 55 years old. By the time you reach 75 years old you have the same chances of getting into an accident as a teenager.

Consider whether or when you probably will stop driving. Deciding when to stop driving will not only bring peace of mind to your family and friends but will also help with your financial plans. Reducing the cost of insuring and maintaining a car from your monthly expenses may be the difference between maintaining your standard of living and depleting resources early.

If you feel that giving up driving is not an option, get involved with the American Association of Retired Persons Driver Safety live and virtual classes. Many states also offer a course titled 55 Alive that can be of value.

3. Funding Longer Life Expectancies

This gets to the money heart of aging. How much income will you need in retirement? Look at what assets you have that produce income. Research payment options available with pensions, annuities, and life insurance prior to the date you retire, if possible. And carefully incorporate life insurance and annuities into your retirement financial planning to maximize and guarantee your income flow.

4. Retirement Plan and Savings Distributions

Retirement plan distributions are the funds you receive from retirement, pension, IRA, 401(k), and other tax-deferred plans once you reach the mandatory fund disbursement age. How to withdraw from your savings is one of the least investigated parts of retirement planning. We become so focused on building assets that we don’t worry about how they will be distributed until we reach retirement age. But hasty or ill-conceived plan distributions might give you less income than planned, leaving you with a lower standard of living during retirement or an increased risk of outliving your assets.

5. Estate Planning Considerations

Not only is it difficult to create and keep your assets, it is also difficult to maximize asset distribution after your death. It is in your beneficiaries’ best interest to minimize the amount of your assets that will be received by the government through inheritance taxes. Consider the probate consequences on your estate. A careful life in insurance distribution plan can minimize tax consequences for your heirs.

You may want to consider living trusts and other vehicles that allow you to receive income from assets that are transferred to loved ones. A good financial planner can give you advice on the tax advantages of various estate planning options.

6. Death Benefit Protection

Many people assume that as they get older and retire the need for death benefit protection decreases. Nothing could be farther from the truth. Death benefit protection is always needed. What changes is the level of protection you need. Having life insurance in place that provides some amount of cash death benefits can help you:

  • Defray taxes

  • Protect loved ones

  • Pay final expenses

  • Transfer wealth with tax advantages

  • Prepare for charitable giving

  • Invest money for your heirs’ future use

Life insurance products provide many ways to transfer wealth while providing tax benefits for your heirs. Insurance products are also ideal for funding charitable giving. And these products offer you several ways to continue fund growth while you are retired. For example, you may want to buy a structured annuity that allows you to continue investing in potentially high-growth equities.

7. Income Protection

One of the greatest risks to achieving your retirement plans is not losing your job but becoming disabled. A disability can force you into early retirement long before you have accumulated the funds you need to live the rest of your life. Income insurance protection is a critical part of your current financial plan. Make sure you are fully aware of the provisions in your disability income policy. Not all income may be covered. You will want a disability policy that provides sufficient income during disability periods to protect your retirement savings goals. Remember that purchasing disability protection is less expensive when you are young, rising as you get older when earnings are at their peak. Protect your future nest egg by guaranteeing your current income.

Other Considerations

Added to the seven challenges is the fact that most people want to continue to retain independence during their retirement. They discover a heightened sense of responsibility for their own situations. They do not want to be viewed as a burden on society and will do almost anything to escape this perception. As more Americans put retirement plans in place, they become aware that only they can be fully responsible for their own retirement financial security.


How will you address the financial challenges of aging? Will you outlive your assets? Not with careful planning and aggressive savings. There is one point I would like to leave with you, it is this—it is never too late to plan for your future. Please help yourself by putting a fully thought-out financial retirement plan in place today.


Ready to improve the quality of your financial life? Harry is the host of a new podcast from the FinancialVerse where he shares practical ways to relieve money stress and anxiety. Each 7 to 10-minute episode is designed to fit into your busy lifestyle.

Subscribe today or just ask Alexa or Siri to play the FinancialVerse podcast.

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