A stress-free retirement is something most seniors look forward to and flow of cash as and when required can help them achieve it. Be it their day-today expenses, health-care costs or retaining the lifestyle they have maintained so far, there are options that can serve every purpose and help seniors have a relaxed and fun-filled retirement life.
Here's a round-up of the top 12 Ways of Financial Support for Seniors.
1. Social Security
It's a federal benefit offered to qualified individuals who have been paying taxes into Social security while at work. The benefit replaces 40% of a wage earner's monthly income.
2. Supplemental Social Security Income
If social security isn't enough to serve your needs, you can supplement it with an added benefit – the supplemental income. Seniors who are aged 65 or above and disabled persons can avail such benefits.
3. Retirement Plans
Employee sponsored 401k and 403b Plans as well as Traditional IRAs and Roth IRAs are the ones you can contribute to and build up savings for old age. Even if you are 50 years old, you can start contributing but the contribution limit may be higher.
Traditional IRAs, 401k and 403b plans require you to pay tax on withdrawal. At the age of 70 and 1/2 years, you should start taking out a minimum distribution annually.
With a Roth IRA, you can contribute even after 70 and 1/2 using after-tax dollars. And, under certain conditions of distribution, you may not even have to pay taxes on withdrawal.
4. Self-employed Retirement Savings
Aged persons having their own businesses can accumulate savings through the Keogh plan, SEP-IRAs or Simple IRAs.
Contributions to SEP IRAs are higher than that of Traditional IRAs. For Simple IRAs, the contribution is limited to $13,000 for those aged 50 and above and $10,500 for others (in 2007).
5. Long-term Care Insurance
If you are middle aged or 50 years old, then it's the right time for you to purchase such a policy. This insurance policy covers your long term medical costs such as nursing home care, physical rehabilitation and the like. But you need to pay premium and once it stops, you lose the coverage.
6. Medicaid
This is a long term health-insurance program offered jointly by the Federal and State governments. Mostly people having low income and assets can qualify for it. But there are limitations as far as the coverage is concerned and you may get disqualified under certain conditions.
7. Medicare
Unlike Medicaid, Medicare is a short term care Federal program available to anyone aged 65 or even below it if he's disabled. The coverage includes skilled nursing care for limited period, hospice care and others.
8. Reverse Mortgages
This is a financing option for anyone aged 62 or above wherein one can borrow against the equity in his home. Be it renovating your home or paying for long term care insurance premiums or else nursing home costs – a reverse mortgage can help you in all areas.
The best thing is, you need not make monthly payments except under certain circumstances. When the loan term gets over, either the lender takes away your home, sells it and gets back the proceeds with interest or else your heirs pay it off to keep the property intact.
9. Pull out equity
Those who do not qualify for reverse mortgages can take out conventional second mortgage to serve their purposes. It can be either a home equity loan or a home equity line of credit. The latter works similar to that of a credit card; you can thus get cash for immediate purposes. But unlike reverse loans, there are monthly payments and in case you aren't fit and fail to make regular payments, you may possible lose your home.
10. Endowment Insurance Policy:
You can get a good amount of cash from your endowment insurance policy, if you have applied for one earlier at a young age. Such a policy pays out a lump sum amount after a specified number of years or upon death. But you will have to pay more in terms of annual premiums compared to that on other policies.
11. Annuity:
It's an insurance contract which if purchased will give you a series of periodic payments till death or when the term ends. The money used to buy the policy grows tax-deferred until you start getting the payments.
The cash amount becomes variable when the company invests your funds into bonds and other investment options. The best thing is even if you're 50, you can go for it. Know more...
12. Life Settlement Services:
Those in need of immediate cash, that too, in large amount, can avail life settlement services. It's a kind of financing option which allows one to sell his life insurance policy to investors through brokerages. On doing so, the insured can earn more than the cash amount one can get upon cancellation of the policy prior to maturity or before it is payable upon death.
No doubt, there are various options of financial solution for seniors but they need to understand their requirements and choose the one that best fits into their situation. |
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