For Seniors: Quick Tips for Protecting Your Finances—Part 2
Borrowing Money
Review your credit reports even if you don't plan to apply for a new loan. Why? Mistakes or other errors on your credit reports could make it more costly for you to buy insurance or borrow money (for example, if your credit card company raises your interest rate on future purchases because of a problem tied to a credit report). And, monitoring your credit reports is a way to detect identity theft. Order your free credit report at least once every 12 months from each of the three main credit bureaus at https://www.annualcreditreport.com/index.action or by calling 1-877-322-8228.
Think twice before accepting an offer to advance a portion of your future pension, Social Security, or other retirement income. These offers are similar to payday loans and likely involve costly fees and interest. You can also find yourself taking out similar loans in the future—paying additional fees and interest charges—to make up for new cash shortages as you repay the original loan. "If you need to borrow money fast, check with your bank and other financial institutions, and compare the products they offer based on the annual percentage rate," advises Luke W. Reynolds, chief of the FDIC's Outreach and Program Development Section.
Use credit cards cautiously. Accumulating debt can be costly, yet many seniors have considerable credit card debt. Before making purchases using your credit card, consider whether you will be able to pay your balance in full when the statement arrives so you will avoid costly interest charges. Even small purchases can add up to big credit card bills.
Remember that a reverse mortgage will eventually have to be paid back—with interest. Reverse mortgages allow homeowners ages 62 years or older to borrow against the equity in their homes without having to make monthly payments as long as they meet the terms of their loan agreement, such as staying current on property taxes. However, the money borrowed, plus interest, must eventually be repaid, usually when you or your heirs sell the house. "If you do get a reverse mortgage and you live in the home with your spouse, some experts suggest that both of you sign the reverse mortgage agreement to ensure that the surviving spouse can continue to live in the home if one dies before the other," Reynolds added.
Earning Money
Think about ways to turn a hobby or another interest into a part-time job. Other possibilities for supplementing your income in retirement include a seasonal job or freelance consulting. But, consider if this extra money could affect other aspects of your finances tied to your income, such as a potential increase in your Medicare costs or a possible temporary reduction in your Social Security benefits. Also consider any income tax implications.
U.S. Federal Deposit Insurance Corporation. (Updated 2014, February 14). For seniors: 15 quick tips for protecting your finances. Retrieved November 8, 2016, from http://www.fdic.gov/