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Understanding Frailty Risk & Its Impact On Retirement Planning Thumbnail

Understanding Frailty Risk & Its Impact On Retirement Planning

Aging gracefully is a nearly universal goal. Continuing to enjoy life, having a low risk of disease or disability, and maintaining a high level of physical activity and mental acuity are the hallmarks of successful aging. The process of aging, however, impacts people differently, and leaves a significant portion of older adults vulnerable to deteriorating physical or mental health, rendering some unable to continue to manage their personal and financial affairs. In some unfortunate cases, this can lead to elder abuse. While unpleasant to contemplate, one-third of those ages sixty five or older suffer some degree of frailty and these risks increase with age. The good news is that many of the risks associated with aging can be addressed with good planning.

The Risks

Frailty can set in at a relatively young age and may impact an individual’s ability to work, which may result in an earlier retirement than planned. Those retiring earlier than expected are less likely to have accumulated adequate retirement savings and may be forced to collect Social Security benefits sooner than anticipated. Additional risks include the increased, and often unforeseen, costs associated with managing chronic conditions and the inability to effectively manage one’s financial affairs.

A recent study from MetLife Mature Markets Institute notes that almost one in four adults age 65 remain employed full time, but plan to retire within 3-4 years. Close to half of the respondents cited the need for additional income, savings or work related benefits as the primary reason for their continued employment. As noted in previous blog posts, the combination of relatively short periods of additional work and the deferral of Social Security benefits can have a profound impact on retirement readiness- something that is clearly jeopardized by an unplanned early retirement.

Health care and long-term care costs also tend to be higher for frail, older adults. Married couples covered under Medicare that have median drug expenses and wish to have a seventy five percent chance of covering their combined health care expenses need to budget about $174,000. A ninety percent chance of success would require $296,000. That same couple with prescription drug costs in the ninetieth percentile would need to budget $399,000 to ensure the same chance of success. Not surprisingly, long-term care utilization rates are also higher for frail adults, often adding a significant additional financial burden.

Management of household finances and general upkeep may also become a challenge for many adults, and a special concern for those with impaired health. A lack of mobility can make everyday tasks like home maintenance and grocery shopping difficult. Remembering to pay bills, filing complicated medical insurance claims and managing complex financial strategies can become daunting, even for those older adults in good health.


Maintaining good physical and cognitive health can help mitigate or alleviate some of the risks associated with diminished mobility and mental acuity. Regular exercise that includes elements of resistance training and aerobic conditioning can help seniors maintain strength and conditioning. The practice of Tai Chi and Yoga has been shown to promote flexibility and balance, which may reduce the risk of injury. Mental functioning may be improved by engaging in cognitive exercises, but simple things like maintaining an active social life and reading can help keep older adults mentally sharp.

Larger homes and those further from amenities are more challenging to maintain than smaller and more centrally located homes. Many seniors return to urban areas after years spent in a suburban or rural setting, drawn by the availability of public transportation, shopping, cultural institutions and activities that help them remain active. Retirement communities that offer a range of services and care is another option that is gaining in popularity.

At some point, older adults may need to enlist the help of trusted family members, friends and advisors to help make important decisions. Simplifying financial affairs, paying bills online and having Social Security or pension checks directly deposited can help reduce some administrative burden, and allows seniors to retain a level of control and privacy.  Asking insurance carriers to provide premium reminders, or late payment notices can help ensure that insurance plans do not lapse for lack of payment. Complex financial strategies may be more difficult to manage as the years pass. Seniors may come to rely more on their advisors and often begin making more decisions in collaboration with trusted family members. Advisors should be cognizant of these shifts and may recommend strategies for the later stages of retirement that are easier to manage than those used for younger retirees.

A properly drafted estate plan is a critical component of retirement planning, and helps address some of the risks associated with frailty. In addition to a will, there are several commonly used documents that you may consider including in your plan.

  1. A Springing Durable Power of Attorney: used to establish an agent to make financial decisions on your behalf if you are unable to do so. The power is contingent upon an event (springing) and lasts throughout the event.
  2. Health Care Directive/Living Will: details your wishes regarding end of life care and treatment. It is also referred to as an advanced directive or physician’s directive. To help ensure compliance, it is important to discuss your wishes with your family and doctors, and make them aware of the existence and location of your directives.
  3. A Durable Health Care Power of Attorney: grants authority to an agent to make health care related decisions on your behalf. It is generally advisable to select a single individual that you trust to carry out your wishes, and a continent in the event that they cannot serve.
  4. Revocable Living Trust: a trust that can be revoked or amended by the grantor and that is often used to hold title to financial assets, such as savings or investment accounts. The trust will name a trustee (often the grantor) and a continent trustee(s), which helps to ensure that someone will continue to make important decisions pertaining to asset management and income distributions if you are incapable of doing so.
  5. Irrevocable Trusts: a trust that cannot be revoked by the grantor and may be used to help ensure the continuation of wealth transfer objectives.
  6. Special Needs Trust: a trust that is established for the benefit of someone with a qualifying illness or disability. These trusts are often used to ensure that assets are earmarked for the care of a vulnerable child or grandchild, while allowing that individual to qualify for care under Medicaid.

Contemplating a time when managing personal and financial affairs is impeded by failing health is an important but often neglected component of planning. Making small changes in lifestyle and enacting proper safeguards may help extend the period of time that seniors live unassisted, and can make lending them assistance less cumbersome. In retirement, a well-planned and simplified existence may ultimately lead to a happier and more sustainable one.