Lending Money After Retirement: 3 Things Seniors Should Consider to Avoid Risks

You must have often heard people say, “I lent money to my friend, but after that, he no longer behaves like a friend.” Especially, if you are an elderly person, try to avoid lending money to your friends and family, as it is not easy to ask them to return the money. It can be difficult for an elderly person to run from pillar to post to get their money back, so they should avoid lending their money unless it is essential. The question now is what steps can be taken to reduce the risk of loss and make the lending process safer. Let’s look at three important things that elderly people should do when considering lending money to someone.

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Only lend an amount that does not impact your retirement plan

Remember that you are no longer earning money and are relying on your accumulated retirement savings to cover your expenses. Before you lend money, review your financial needs and estimate how much extra money you have available, that is, in addition to the funds needed to meet your retirement goals and for unforeseen needs.

You can lend a small portion of the extra funds. These funds can serve as a financial cushion for you, so avoid depleting them completely by lending them to other people.

Lend in front of your friends and loved ones

When lending money, make sure to involve your family members in the entire process and give the money in front of them. Your relatives or friends should be informed about the details of the person to whom you have lent money, the amount given and the repayment period. You can authorize family members to receive the money from the borrower and also mention the details of the authorized person in your will.

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Discuss the repayment schedule for the money you plan to lend

Before lending money, check the reason why the borrower needs your financial support. If the borrower needs money for the wrong reasons, such as gambling, speculation or luxury needs, tell him that you cannot lend him money. If the borrower has contacted you for a valid reason, discuss the applicable terms, such as the time limit for returning your money, the interest charged and, if possible, you can take a post-dated check to ensure prompt return of your money.

Lending money to your friends or relatives can be tricky because you can’t keep pestering them again and again when they are late in returning your money. If you pester them often, they might feel bad and you might end up putting a strain on your relationship and you can’t afford to lose a relationship after retirement. Therefore, lend money only when you think there is no way to avoid it or you are the only hope left for the borrower.

The author is an independent financial journalist.