



Take Charge of Your Money at 70+


Senior couple paying bills on computer (Getty Images/photosindia)

Entering retirement opens up a new universe of saving options, big and small. — Getty Images/photosindia

Where do you stand, financially speaking, compared with your peers? Are you making more than your college classmates? How do your saving and spending patterns stack up against those of the rest of your generation?

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See also: Take charge of your money at 50+ | And at 60+

The tips on the next pages will help you do just that, walking you through the big financial questions you'll face in the next 10 years of your life. It's a pocket guide to your money in your 70s and beyond: how to maximize your income, rethink your investments, spend smarter and save more, starting right now.

What We Owe And Own

the plan for what you owe (and own)

1. Start a debt-busting avalanche

According to the Census Bureau, the median household debt for Americans 65 and over more than doubled between 2000 and 2011, rising to $26,000. Part of that problem: plastic, particularly for the oldest age segment. Back in 2007, households headed by someone age 75 or older had a median of just over $800 in credit card debt. By 2010 that figure had ballooned to $1,800. At an interest rate of 19.9 percent, that would cost $360 a year.

Freeing yourself from credit card debt will make your financial life in retirement easier. You'll get the biggest bang for each individual buck by paying off the highest interest rate debt first, while making minimum payments on the remainder. It's called the avalanche method, and it gets you out of debt cheapest and fastest. If you have a credit card charging you 19 percent it doesn't make sense to send extra money to the one charging 14 percent. Once that highest interest rate debt is retired, move onto the next highest. (To run your own debt-free calculation, try the Credit Card Avalanche Calculator at

2. Understand refis and reverses

Ideally, you'd be mortgage-free by now. But if that's not possible, or if you need to tap your home equity for living expenses, options exist.

Reverse mortgages are marketed heavily to older homeowners (eligibility begins at age 62); they convert a piece of home equity into cash or a line of credit. The payout is tied to your life expectancy, so older homeowners can expect more, and the money can be taken as a lump sum, drawn on like a home equity loan, or received in monthly sums that can last as long as you or your spouse lives in the house. But reverse mortgages are complex, are laden with fees and won't allow you to tap all of your equity, and the interest rate can be 1 to 1.5 percentage points higher than you can get by simply refinancing.

"Take a 70-year-old who bought a home 15 years ago," says Keith Gumbinger of the mortgage information website "He's halfway through the mortgage and has 15 years left. He can get a new 15-year loan at 3 percent and save a bundle. Or, he can get a 30-year term and cut his monthly payments down to open up even more cash flow."

Refinancing has its own issues: You'd be extending your debt, and if you're not drawing a strong enough income the bank may not be willing to work with you. If you have 10 years or less left on your loan, "it may not be worth the hassle," says Gumbinger.

What We Make And Save

the plan for what you make (and save)

1. Spark a sell-off


2. Get back to work




3. Make a policy decision


How We Invest

the plan for how you invest

1. Find balance

Rebalance your assets at least once a year when you're in retirement, so that you have the appropriate amount in stocks, bonds and cash (as well as all of their subcategories) for your age and risk tolerance. Why? Because should the market take a major tumble, you have little time to make up what you've lost. If you are reading this and berating yourself for never rebalancing, it's time to punt. Put your money into a fund that will rebalance your account for you — a target date retirement fund.

2. Invent a pension

Converting 20 to 25 percent of your assets into an immediate annuity provides a fixed income stream for the rest of your life (and your spouse's, if you structure it that way), insuring yourself from the risk of outliving your money.

Your return is higher in your 70s than earlier, says financial planner Bill Losey, author of Retire in a Weekend, "because the older you are, the shorter your life expectancy, the higher your payout." Unless you purchase inflation coverage, it won't rise with inflation, and when you're gone, so's the principal. "Because today's low interest rates are currently not working in your favor, it makes sense to annuitize in chunks as you age," says Losey. "Then, you invest the remainder of your nest egg to provide the growth you need to keep up with inflation."

3. Look longer term

Got great genes and fear running out of money after age 85? You can hedge your bets with longevity insurance, a kind of deferred annuity that kicks in at an advanced age (typically 85). Then you'll start receiving monthly sums. Longevity policies are far cheaper than immediate annuities, and many retirement experts promote them as a defense against outliving your savings. But if you pass away early, the money's gone.

4. Work out the wills

If haven't already, talk to your kids or other heirs about your financial picture, says Maryland financial adviser Tim Maurer. "You have the opportunity to communicate your legacy, financial and personal, to your children. If you've had your head down, it's time to pick it up, while you have time." Every three years you should be going over your estate planning documents. A will, durable powers of attorney that allow others to make medical and financial decisions for you, and a living will should be in place.

What We Spend

the plan for how you spend

1. Watch spending creep

"The biggest problem I see with people their first three to five years in retirement is that they're spending more money than they thought they would," says planner Bill Losey. Suddenly, you have Monday through Friday free. You can go out for a real meal rather than eating lunch at your desk, hop on the train and go see the grandkids, play a round of golf. And the money vanishes. So track your spending, even if you never had to before. A lavish start to your retirement can mean there's not enough nest egg left to grow to carry you through to the end.

2. Call the mover

Downsizing to a smaller, less expensive home is "the most powerfully positive thing that someone can do to improve their retirement situation," says planner Tim Maurer. This doesn't have to mean relocating across the country. Trading a high-tax school district for one nearby with lower taxes can make a substantial difference. If you're willing to go a few hours away — say from San Francisco, where the cost-of-living index is a sky-high 199, to Carson City, Nev., where that index is a below-average 99 — you can revolutionize your standard of living.

3. Reimagine your life insurance

Maybe you first bought life insurance when you had a baby. Now that baby has a baby of her own. Do you still need the coverage? If you are healthy and your obligations are behind you — if your spouse could live on the money in the retirement accounts plus Social Security if you died and the kids are on their own — drop it. If you do need to continue it, act now to extend your current policy, says the LIFE Foundation's Stephen Rothschild. The younger and healthier you are when you buy new coverage, the cheaper it's going to be.

4. Don't help your kids too much

Almost 25 percent of Americans 50 and up use credit cards to help other family members, an AARP/Demos survey says. Building debt so that your kids don't have to isn't wise. If they're struggling, refer them to a credit counselor at Both parents and grown kids are more comfortable talking to an adviser about money than to each other, according to a Fidelity study. Find one through the Financial Planning Association ( or the National Association of Personal Financial Advisors (

Jean Chatzky, AARP’s financial ambassador, is a best-selling author and an award-winning personal finance journalist. This article includes additional reporting by Arielle O’Shea.

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