The Administration for Community Living has issued their 2017 Profile of Older Americansreport, and the data indicate several interesting and important trends in our country’s population demographics. Unfortunately, these trends dovetail to create a concerning picture of the financial needs and preparedness of this group.
First, the number of people living to be 65 or older is booming. In 2016 they represented 15.2% of the population, but by 2040 that number is expected to jump to 21.7%. From 2006 to 2016 the demographic group of people 65 and older increased by 33% to 49.2 million, and the number of people likely to reach 85 is predicted to more than double by 2040. In addition, right now people that reach the age of 65 are expected to live an additional 19 years.
The takeaway: if you’re 65 or older, you’re probably going to have to fill two decades with activities, goals, and relationships! This is certainly an exciting development, but it can also be a daunting one. You might have thought you needed to find a hobby or a part-time business when you retired, but this data suggests that you might need two or three to fill all that extra time.
Second, as more people reach the age of 85 or older, the need for caregiving keeps increasing. Only 9% of people aged 75-84 needed direct care, but once a person reaches 85, that need jumps to 22%. That’s almost 1 in 4 people. This trend is likely to keep going in this direction.
The takeaway: as part of your financial planning for retirement, you may want to prepare for the possibility that you will need to pay for direct care in your older age. The chance of this coming to pass for older Americans is becoming more likely in each successive year.
Third, the median income is generally not high in the 65 and older age group. For males it was $31,618 in 2016, and for females it was $18,380. For married couples that is manageable, but by 2017 only 46% of women were married, as opposed to 70% of men. Women live longer than men, so the disparity in marital status figures may be attributed to that fact. Combine those numbers with the median income figures, and it is clear that the finances for many older Americans are very tight.
Which brings us to the last big point.
Fourth, healthcare is getting more and more expensive, and we have no reason to believe that will change anytime soon. In 2016, the out-of-pocket costs of healthcare for people 65 and over was $5,994, up 38% from 2006. That, in conjunction with the median income figures create a potentially difficult situation for some of our older citizens.
No one can be sure of their future with any kind of exact precision, but data trends across the population at large are good indicators of how the future might look. People are living longer, more Americans need direct care as they age, the cost of healthcare is rising faster than income, and it is very difficult to know exactly how much money will be needed for retirement. Are there ways we can hedge these costs if the need does arise?
Life settlements are a good option to inject extra cash into that equation. Policy owners of retirement age and older may qualify for a life settlement – a transaction in which they sell their unneeded life insurance policy to an institutional buyer for more than the cash surrender value, and less than the death benefit – thereby uncovering cash from an asset they may not have known had any value while they are still alive.
The lumpsum payment can be used to pay for direct care needs or anything else – including padding their retirement.
To get an idea of whether you would be a good candidate for such a strategy, take our quick 7-question quiz.