24 - Banking for Seniors: Protecting Your Finances in Retirement

This episode focuses on the unique financial challenges and opportunities of retirement. We discuss practical strategies for simplifying and managing retirement income, including Social Security and RMDs. We also take a deep dive into the most common scams that target seniors, like the "Grandparent Scam" and tech support fraud, and explain the importance of having a trusted contact on your accounts to safeguard your financial well-being.

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Transcript

24 | Banking for Seniors: Protecting Your Finances in Retirement

00:00:00 Daniel Hill: Okay, Shanna, let's paint a picture. A scenario that we see play out all too often. An elderly woman is at home and the phone rings. The voice on the other end is panicked and says, grandma, it's me. I'm in trouble.

00:00:17 Shanna Browning: Oh, the one that just makes your heart sink. The classic grandparent scam.

00:00:23 Daniel Hill: Yes, the voice sounds a little off, but she's so overcome with worry for her grandson that she doesn't question it. The person on the phone says they've been arrested in another country and need bail money wired immediately. And they beg her, please don't tell Mom and Dad. They'll be so mad at me.

00:00:42 Shanna Browning: It's such a cruel manipulation, and it just breaks my heart for the elderly of our our generations. But it preys on their love and their instinct to protect their family. Also, while isolating them by telling them to keep it a secret.

00:00:58 Daniel Hill: And in a state of panic, wanting to help, she goes and wires thousands of dollars. It's not until hours later when she finally gets ahold of her actual grandson. She realizes the horrible truth her money's gone forever.

00:01:15 Shanna Browning: And unfortunately, it's a heartbreaking story, but a stark reminder that as we or our loved ones get older, the financial world can present a new and different set of challenges, and the stakes are incredibly high.

00:01:38 Daniel Hill: Welcome back to Making Sense of your Cents. I'm Daniel Hill.

00:01:42 Shanna Browning: And I'm Shanna Browning, and today what we're focusing on as we told in our story is a very important topic banking for seniors.

00:01:50 Daniel Hill: We'll be discussing strategies for simplifying and managing retirement income, how to avoid spot the scams that specifically target older adults, and the importance of having a trusted support system in place for our finances.

00:02:07 Shanna Browning: So, Daniel, as you stated, let's just start with the transition into retirement. So for decades, you're used to a regular paycheck coming in. And then you know what? Hey, I want to retire. And then that stops. The cash flow situation changes dramatically. What's the biggest adjustment people need to make?

00:02:25 Daniel Hill: Well, the biggest adjustment is moving from an accumulation mindset to a distribution mindset. Your whole life you're working and it's about accumulating assets while in retirement. You have to create a strategy to turn those assets into a reliable monthly, quote unquote, paycheck to live on.

00:02:48 Shanna Browning: And what does that paycheck and where does that typically come from?

00:02:53 Daniel Hill: Well, it's usually a combination of sources. The foundation for most people is Social Security. Then you have pensions if you're fortunate enough to have one. And finally, you have distributions from your personal retirement savings like your 401k or your IRAs. A key part of this is understanding required minimum distributions or RMDs.

00:03:16 Shanna Browning: Well, and it's a term that, if you don't really know a lot about, can cause some confusion. So what are RMDs?

00:03:22 Daniel Hill: Well, for most retirement accounts, like traditional 401ks and IRAs, the government requires you to start taking money out once you reach a certain age.

00:03:33 Shanna Browning: So the requirement. Correct. Okay.

00:03:35 Daniel Hill: And that age is currently seventy three. The government allowed you to save that money tax deferred for decades. And now they want you to start withdrawing it so they can collect the income tax on it.

00:03:47 Shanna Browning: Again, it's important to get this right because there are big penalties if you don't. Right.

00:03:53 Daniel Hill: The penalties are significant. A key part of managing retirement income is knowing your RMD amount for the year, and having a plan to withdraw it. Our best advice here is to simplify. A great strategy is to have all of your income sources, your Social security, your pension and your RMD withdrawals deposited directly into one primary checking account and that becomes your cash flow hub.

00:04:20 Shanna Browning: Well, and I like that right. Just put it all together. And then from there you can set up automatic recurring transfers to pay your regular bills.

00:04:27 Daniel Hill: Right. Automating your mortgage or your rent, your utility bills and your insurance premiums from that one central account can take a huge mental load off of you. It ensures your core expenses are always covered on time. As we age, the less we have to actively manage, the better. Simplicity is a key to finding financial peace of mind in retirement. Now, Shanna, let's dive deeper into the topic that we started to talk about at the beginning of our episode. It's an unfortunate reality that seniors are often the primary target for financial scams. And as the bank's security officer, this is something I am very, very passionate about.

00:05:10 Shanna Browning: And me too, because I don't understand why it's a huge problem and I don't understand why are why, why, why are our seniors so often targeted?

00:05:20 Daniel Hill: Well, Shanna, there are a few reasons. Scammers know that seniors are more likely to have a significant nest egg saved up. They also know that seniors are more often more polite and less likely to hang up on a stranger. And finally, scammers prey on a potential lack of familiarity with the latest technology. Scammers.

00:05:42 Shanna Browning: We just don't like them. So we've talked about that grandparent scam. And so what are some of the other specific scams that disproportionately target older adults?

00:05:53 Daniel Hill: Well, the tech support scam is huge. You'll get a pop up on your computer or a phone call saying your device is infected with a virus, and they need you to grant them remote access to fix it. Once they have access, they can install malware to steal your banking passwords. Another big one is the romance scam, where a scammer builds a fake online relationship over weeks or even months and then starts asking for money for a fake emergency.

00:06:21 Shanna Browning: I tell my dad, don't answer the phone if you don't know it, don't answer the phone. What is the single most important piece of advice to remember to avoid these though?

00:06:29 Daniel Hill: Well, like you said, don't answer the phone. One simple rule is never give money or personal information to someone based on an unsolicited phone call, text, or email. If someone calls you creating a sense of urgency and demanding money, it's a scam one hundred percent of the time. The second rule is pause and verify. If you get a call from your grandson, hang up. Call your grandson back on the phone number you already have for him. If you get an email from a bank, don't click the link. Call the bank directly using the number on the back of your debit card.

00:07:08 Shanna Browning: Those are some great rules to live by. And what should someone do if they realize they have been scammed?

00:07:15 Daniel Hill: Well, that is so, so very important. There's no shame in being a victim. These scammers, they're professionals. Yep. The first thing you should do is call your bank immediately. Call us. We can help. We can take steps to further protect your account. The second is to report it to your local police department and then to the Federal Trade Commission or the FTC. Reporting it can help prevent others from becoming victims as well.

00:07:44 Shanna Browning: And I think two, for us in our industry, I think it's important that people understand this happens way more than they think it happens and that they shouldn't be embarrassed. Yes, we're we're going to help you. We're not there to judge you. We're here to help you. So I think that also leads basically perfectly into our final and most important topic. And as we age, meaning everything on our own can become more challenging. And so when you have a trusted support system for your finances, it's not a sign of weakness. It's actually a sign of wisdom.

00:08:17 Daniel Hill: Absolutely. It's one of the most proactive and protective steps a senior can take. And it starts with one simple but crucial conversation with your adult children or trusted loved one. You need to have someone in your life who knows where your financial documents are.

00:08:34 Shanna Browning: Tell me what you mean by that.

00:08:36 Daniel Hill: Well, someone needs to know the location of your will, your bank account information, your insurance policies, the passwords to your online accounts. This information should be stored in a secure location, like a safe deposit box or a fireproof safe at home. And that trusted person should know how to access it in an emergency.

00:08:57 Shanna Browning: And I think what we want to say is this isn't about us telling you to give up control of your finances. No, it's about ensuring that if something happens to you, a medical emergency, for example, someone you trust can step in to make sure your bills continue to get paid and that your financial life doesn't fall into chaos.

00:09:17 Daniel Hill: Exactly. And there are formal legal tools to set this up. The most common is a durable power of attorney. This is a legal document that gives a person, you choose your agent the authority to make financial decisions on your behalf if you become unable to do so. This is something you should set up with an attorney while you're healthy and of sound mind. It's a foundational piece of estate planning.

00:09:44 Shanna Browning: Well, and I'm my dad's power of attorney, so it's something that needs to be done and talked about in families. But there's also a simpler step you can take right at the bank.

00:09:55 Daniel Hill: Yes, you can add a trusted contact to your account. This is a person you authorize the bank to contact in specific situations, such as if we suspect financial exploitation or have concerns about your well-being. This person cannot make transactions or see your balances. They are simply a resource for us to contact on your behalf to help protect you. It's a fantastic first layer of protection that is very easy to set up. This has been a really important conversation and it's one that we hope families will have together. And that leads us directly to this week's actionable tip.

00:10:36 Shanna Browning: So your action item for this week is to have the trusted contact conversation.

00:10:43 Daniel Hill: If you're a senior, your action is to identify the one person in your life a child, a sibling, a lifelong friend who you trust implicitly with your financial affairs. Your task is to have a conversation with them. It can be as simple as saying, I want to make sure you're aware of my financial situation in case of an emergency. Can we set aside some time to talk about it?

00:11:06 Shanna Browning: And if you're the adult child of a senior, your action is to initiate this conversation with your parents. You can say, mom, dad, I want to make sure I know how to help you if you ever need me. I'd feel a lot better if I knew where your important documents were and who your financial contacts are.

00:11:25 Daniel Hill: Now, this conversation can be a little awkward, but it's one of the most loving and responsible conversations a family can have.

00:11:33 Shanna Browning: Yes it is.

00:11:34 Daniel Hill: It provides peace of mind for everyone involved. The first step can be as simple as calling us to add that trusted contact to your account.

00:11:42 Shanna Browning: And it's about care and preparation. And it's really a gift to everyone in the family. So thank you for joining us for this important conversation.

00:11:51 Daniel Hill: Well, we are nearing the end of our very first season, and we're so thankful that you've been on this journey with us. We appreciate you and we thank you for being our listeners.

00:12:06 Shanna Browning: Thank you, thank you, thank you. On behalf of Daniel Hill, I'm Shanna Browning. Thank you for listening. And go out and make some sense of your cents.