3 Growing Financial Risks Facing Retirees 75 and Older

As the number of retirees 75 and older grows, so do the financial risks they face, and many will be unprepared to address those risks.

That’s the conclusion of a new report from the Center for Retirement Research at Boston College.

“The future will see an increasing number of older retirees relying on relatively small 401(k) balances and on Social Security checks that do not stretch as far,” according to the report.

Citing research from the U.S. Social Security Administration’s Retirement Research Consortium, CRR identifies three primary financial risks that retirees 75 and older face: out-of-pocket medical expenses, financial mistakes due to cognitive impairment and widowhood. By 2040, roughly 43 million retirees will be 75 or older, almost double the 23 million projected for 2020.

Out-of-Pocket Medical Expenses

The report cites several studies about increasing out-of-pocket medical expenses for retirees 75 and older, with costs ranging from an average 20% of total income to as much as 142% for those who are 85 or older and in the top decile of health care spenders, including long-term care costs.

“The conclusion from these studies is that, to date, out-of-pocket costs pose a risk to some retirees but mainly to those in the tail of the distribution of costs.”

Still, “analysts expect out-of-pocket health costs to continue to grow faster than retirees’ income,” according to the CRR report.

Cognitive Decline and Financial Mistakes

“Financial skill tends to deteriorate for many in their 70s,” according to CRR. It often begins with minor misses like forgetting to pay bills, then gradually evolves to a complete inability to manage finances.