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06 Oct. 2017 | Comments (0)

The Society of Actuaries (SOA) recently conducted in-depth interviews with retirees over age 85 and their adult children.  The report, Post-Retirement Experiences of Individuals 85+ Years Old, summarizing the findings, is available to the public and includes many direct quotes from the retirees and details on how they manage.  This research, together with focus groups conducted in 2015 with retirees who had been retired at least 15 years, provides new insights and demonstrates that some of the most important decisions for many middle-income American families go beyond the traditional issues of saving and investing.  It should be of interest to employers who are building retirement education and planning programs. 

There will be many more people over age 85 in the future.  The United States and many other countries have witnessed major increases in life spans over the last 100 years.   This raises issues of how long retirement assets need to last, when people should retire, and what products and services are needed to support a different population. 

As people are living longer, some people are living to high ages with a lot of vitality.   The interviews of people over age 85 showed huge variation - some were very active with few or no limitations while some had major limitations.  The majority has experienced physical or mental decline.  Health and mobility issues play an important role in defining what activities they can do, their financial needs and their need for support.  Those who are more active may use more financial resources for daily living but have fewer health and care needs.

SOA research indicates that people plan to remain independent, but when they need help and there is no spouse or partner to provide it, it is common to turn to other family members.  Family often steps in and provides a variety of help for as long as they can.

For middle-income Americans, Social Security is the major source of regular retirement income.  Many do not have significant financial assets and for many housing equity is substantially greater than their financial assets.  These Americans retire and often seem to be satisfied in retirement, even though they do not have a great deal of money.   A common financial management paradigm for middle-income retiree families is to manage regular expenses so that they do not exceed income.  These families minimize spending assets, and withdraw only the Required Minimum Distribution (RMD) from tax deferred retirement accounts. They are also reluctant to use home equity to help finance retirement.  The retirees commonly have a goal of maintaining assets, but may use assets if there is a major unexpected expense.  This strategy was articulated to the SOA in these interviews with over age 85 retirees, and also in 2013 in the focus groups with recent retirees as well as in 2015 with those retired 15 or more years. 

Most of the people over age 85 seemed to adapt reasonably well to changing circumstances, as did the retirees in focus groups with long-term retirees.  Many of them are frugal, and they seem fine about it. They accepted their situation and managed within its constraints.  Financial constraints are often easier to adapt to than physical limitations.  When the needs for help exceed what family can provide, it is common for the person needing help to turn to paid caregivers, assisted living or a nursing home.   At that point, assets can decline rapidly, and people are likely to experience major financial issues.  Some will turn to Medicaid.       

Some of the over age 85 retirees expressed regrets but overall the group seemed reasonably satisfied.  The strategy of dealing with problems when they happen seemed to work quite well for many households but not for people requiring substantial long-term care that could not be provided by family, for people who got divorced after retirement nor for people who had adult children with persistent problems needing help.

The research covered the United States and Canada.  There were many similarities between individuals in the United States and Canada, but there are some key differences.  The market for long-term care services is quite different in Canada and the services are less expensive.  Health care financing is very different in the two countries, but for the over age 85 individuals, there did not seem to be many major differences.  The retirees in both countries relied heavily on the public programs, and had most of their acute care covered by these programs and supplemental insurance. 

Implications for employers

Employers may wish to consider these issues as they think about their current and future retirees, as well as employees who have parents at older ages.  Adult children who are heavily involved in helping parents may have stress as well as less time and energy to devote to their jobs.  Their parents are likely to rely on them more as they get frailer, increasing the stress and time demands.

Many employers sponsor extensive financial wellness and/or retirement education programs.  These programs can have a big impact on how well people will do at older ages. There is a lot of potential to add value by helping people do a better job of long-term care planning.

As the defined contribution system matures, employers need to think about what role they wish to play post-retirement and how to most effectively help retirees.

Families are important to people at the older ages, but many people either do not have family members, or no family members are nearby and available to help. Employers may wish to consider whether they will offer resources to help such retirees find help.  An employee assistance program or similar entity could offer such help.

Decisions made around the time of retirement or early in retirement may have a big impact on how well off people are when they reach their 80s.  Social Security claiming is a particularly important decision.  For many middle-income Americans, Social Security is the major source of income at these ages.  People who wait to claim until age 70 will have about 75% more monthly income than those who claim at age 62. 


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  • About the Author: Anna M. Rappaport

    Anna M. Rappaport

    Anna Rappaport is an internationally recognized expert on the impact of change on retirement systems and workforce issues. Following a 28-year career with Mercer Human Resource Consulting, Rappaport h…

    Full Bio | More from Anna M. Rappaport


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