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.

It doesn’t get any better once long-term care costs are included. The study cited findings in 2018 study by the National Bureau of Economic Research that showed the average household composed of those 70 or older will incur an average of $100,000 in total out-of-pocket medical costs, including long-term care, and that the top 5 percent will incur almost $300,000.

The study also cited researchers at the Henry J. Kaiser Family Foundation that concluded that, among older households, medical costs can outweigh income. The study also noted that out-of-pocket costs can also eat into 401(k) assets.

For many in their 70s, the decline in ability to manage money increases the risk of making routine financial mistakes, such as failing to pay bills, and falling victim to fraud, the study found, adding that afflictions such as dementia make the problems worse.

The study pointed out that seniors are more likely than younger people to be solicited by fraudulent investment schemes, with nearly one in six seniors reporting losing money to fraud. 

In addition to out-of-pocket expenses and failing memory, the study pointed out that widowhood poses a financial risk to the elderly. However, that risk has recently declined for many women. The poverty rate for widows, according to a recent study by the Center for Retirement Research, dropped from 20 percent in 1994 to 13 percent in 2014 due to women being more educated and having a larger presence in the labor force.

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