Americans are living longer and are bound to face late-life financial risks that they may not be prepared for, even prior to any need for long-term care, according to a new report.
The study by the Center for Retirement Research at Boston College highlights the risk areas that those 75 and over are susceptible to, including high out-of-pocket medical expenses, an increased possibility of financial mistakes due to declining cognitive abilities and the prospect of widowhood.
The research serves more as a warning because, while it says many Americans are financially capable of dealing with these issues, the number of people who may be adversely impacted may increase over time.
“The situation is generally expected to become more challenging because future retirees will be more reliant on often-modest 401(k)/IRA lump sums rather than the automatic lifelong payment stream of a traditional pension plan,” said the researchers. “At the same time, a rising ‘full retirement age’ means monthly Social Security checks will provide less relative to pre-retirement income at any given claiming age.”
The study points out that although Medicare provides universal health coverage to retirees, out-of-pocket costs can still pose a substantial burden to the elderly. Expenses that Medicare doesn’t cover, such as dental and vision, can eat up more than half of income for the elderly, which potentially can cause them to dip into their savings to make ends meet.