Liz Weston: People with excellent credit are often overly fearful about closing credit cards

Dear Liz: I’m 75 and getting forgetful and disorganized. My prior excellent credit rating has suffered due to late payments because of this. I’d like to simplify my finances by getting rid of extra credit cards, but this will negatively affect my rating even more. Why isn’t there some means for elders to simplify their finances without negative consequences? Some may ask why I care about my credit rating at my age. Well, if there was a major quake and I needed to borrow money to rebuild my condo, it would be important.
Answer: It’s not always possible or even desirable to maintain the highest possible credit scores. Sometimes, other factors must take precedence.
In your case, the most important consideration is making your finances more manageable. You’re correct that cancelling cards could further damage your credit scores, but the impact should be temporary as long as you responsibly handle the cards you keep.
Consider hanging on to one or two cards with the highest credit limits. Credit utilization, or the amount of your available credit that you’re using, is a big factor in credit scores so you’ll want to keep high credit limits if you can. If you’re closing other cards with the same issuer, ask that your credit limit from the closed cards be transferred to the card you’re keeping.
Also, set up automatic payments so that you never again miss a payment. You typically can set up automatic payments to cover the minimum balance, the statement balance or a fixed dollar amount. You can do this online or with a phone call to the issuer.
You should have a document known as a power of attorney that designates someone to handle your finances should you become incapacitated. You’d be smart to start involving that person now so that they’re familiar with what needs to be paid and when. This person could help make sure you’re keeping up with your financial tasks and could take over if you’re feeling overwhelmed.
If you don’t have such a person in your life, please investigate your options. An estate planning attorney or tax pro might have some recommendations, or you can check out the services of a daily money manager. You can learn more at the American Association of Daily Money Managers.
Dear Liz: The standard advice is to delay taking Social Security as long as you can. But if I plug my expected benefits into an Excel spreadsheet, I find that my total benefit if I retire at 67 doesn’t pass my total benefits if I retire at 62 until I turn 77. Retiring at 70 seems like it only pays off, in the long run, once I am 79.
Answer: A spreadsheet is not the best way to determine when to take Social Security, since it can’t capture many of the important factors that should go into the decision.
A key one is survivor benefits. If you’re married and the higher earner, your benefit determines what the survivor gets after one of you dies. Applying early could mean locking the survivor into an inadequate income for the rest of their life.
Another factor is longevity risk, which is often poorly understood. Many people underestimate their life expectancy and the possibility of outliving their savings. Maximizing a Social Security benefit gives you some insurance against that risk.
A free Social Security claiming calculator, such as the one offered by AARP, is a much better place to start. You can learn even more from a paid version, such as the ones offered by Maximize My Social Security and Social Security Solutions.