There is clear and increasing pressure to address the needs of older adults, a demographic that is growing faster than any other globally. By 2060, the US population aged 65 and older will increase from 65 million to 95 million. Combined with a sharply declining birth rate and an uncertain immigration environment, we’re headed toward a situation of increasingly inadequate resources available to support a growing number of older adults.
This directly threatens the financial security of older Americans, who already face challenges maintaining financial stability. And financial security has a direct link to long-term health and wellness; with rising and uncertain healthcare costs, it is difficult to forecast expense needs, and therefore difficult to plan for or accumulate the proper amount of financial resources, especially for low- and middle-income Americans.
The rising costs of retirement stem from three critical factors:
- Inflation and Cost of Living: Inflation affects purchasing power and disproportionately hurts retirees because of their reliance on fixed income streams. A critical income stream is Social Security, with 40% of Americans depending on it for family income and 14% depending on it for at least 90% of their income. However, even with benefits set to increase by 2.5% in 2025, Social Security is not keeping pace with rising costs, and trust funds are expected to be unable to fully cover payouts starting in 2035. This is assuming that Social Security continues to exist as we know it. As we enter an extended, and potentially heightened, inflationary period, these funds will only be further tested.
- Healthcare Costs: Unexpected healthcare expenses remain a major financial burden. Many older Americans lack adequate insurance coverage, with one in five aged 65 and older struggling with healthcare debt. The problem is even more pronounced for those aged 50 to 64 that are not yet eligible for Medicare, with 44% reporting challenges with medical costs. Underinsurance can lead to high out-of-pocket expenses, mounting medical debt, and/or delaying or forgoing necessary care, exacerbating existing health disparities and diminishing quality of life. Caregiving is another major expense for older adults and their families; we want to acknowledge the importance of this topic despite touching on it only briefly in this article.
- Retirement Savings Shortfalls: The retirement savings crisis is severe: a 2022 AARP report estimated a $3.68 trillion shortfall among working Americans. The bottom 50% of earners have no retirement savings, while the middle 40% hold an average of $60,000, which is insufficient for decades of retirement. By mid-century, 25 million older adults could be living in or near poverty.
Insufficient income and retirement savings paired with large, unpredictable expenses makes it difficult for many older Americans to accurately plan for the future, and can often push them into a position of financial instability. As investors, we are looking for solutions that can help alleviate these burdens amidst this growing crisis.
Fortunately, many startup companies are emerging to offer solutions that address the rising costs of retirement and the distinctive needs and consumption patterns of older adults. We consider three primary areas of focus below:
- Retirement products/accounts: Most Americans are limited by short-term savings to invest in retirement. A growing number of product offerings from RIAs, financial institutions, and insurance carriers provide guidance on retirement planning, investing, and benefits. Solutions like Pension Plus mimic pensions, while Nestimate and Assured Allies offer annuities and solutions to increase adoption of retirement solutions, often tied to insurance, to help future older adults feel more secure about meeting their financial needs during retirement.
Large institutions are also creating innovative solutions. In 2024, BlackRock introduced LifePath Paycheck, a retirement income solution available within defined contribution plans, offering participants the option to access guaranteed income through annuity contracts starting at age 59-and-a-half. Although annuities have suffered from poor brand image, the Secure Act made it easier to include these within 401k plans, and they are now gaining broader appeal.
Traditional employee retirement plans remain critical, especially for small businesses, as individuals with access to these plans are 15 times more likely to save for retirement. Companies like Human Interest, Icon and Penelope are offering either affordable retirement contribution plans for businesses of all sizes or the relevant infrastructure. - Retirement planning and protection: While many older adults have saved for retirement, they must carefully plan how they convert their retirement savings into sustainable income streams and ensure that they do not outlive their assets. Older adults can benefit from tools that help convert savings into consistent income and prepare for unanticipated costs for healthcare, home maintenance, and taxes that could cause financial strain.
Companies like Retirable and Charlie help older adults receive financial advisory support, manage retirement accounts, and set up reliable income streams. Financial scams and fraud continue to affect older adults as they become more vulnerable, and companies like Carefull and TrueLink aim to protect older adults’ money and identity. Home equity solutions like Splitero or Hometap can unlock value tied to property, offering an additional safety net in case of emergency for older adults. - Medical Expense Planning: Planning for future medical expenses is one of the most important categories of long-term financial planning for older adults. Companies like CoverRight and Chapter help Medicare beneficiaries ensure that they are enrolled in the plans best-suited for their personal medical and financial needs. Others like GoodBill, Afford Health, and Balto Benefits monitor healthcare expenditures to highlight discrepancies and help payers negotiate in situations where they are inadvertently overcharged.
In addition, a variety of companies provide financial solutions that serve both older adults and their families, from caregiver benefit enrollment businesses to broader family expense management platforms.
Early stage innovators are making impressive strides in supporting retirement planning and the needs of older adults. Our investment firms, Impact Engine and ResilienceVC, focus on the following company characteristics as we evaluate potential investments:
- Direct line to a core driver of financial resilience: Companies should have or be working on a clearly defined and measurable impact on a driver of financial health and resilience: new income, savings and investments, or lowered risk.
- Distribution and Pricing: Reaching underserved customers requires innovative pricing models for those with a lower ability to pay and partnerships with trusted professionals and institutions to reach older Americans where they already are. Direct-to-consumer approaches often struggle due to high acquisition costs. Instead, B2B2C, or business-to-business-to-consumer, distribution remains the most successful and trusted approach. Of course, companies using B2B2C can also have high customer acquisition and administrative costs, and so watching those metrics is key to successfully scaling.
- Innovation that drives scale and positive unit economics: The retirement industry is quite mature, making disruptive innovation difficult, often resulting in incremental approaches that may not result in scale or result in difficult unit economics. Product or distribution innovation that is able to unlock profitable scale is key.
If you are building something interesting and impactful in the retirement space, please reach out to Impact Engine and ResilienceVC – we would love to talk to you.
Rahul Bhide is a Vice President and the economic opportunity lead at Impact Engine. Olivia Grinker is an MBA Intern. Impact Engine is an institutional investor managing venture capital and private equity strategies that drive positive impact in the areas of economic opportunity, environmental sustainability, and health equity.
Vikas Raj is the Co-Founder and Managing Partner of ResilienceVC. Billy Taki is a Senior Associate. ResilienceVC is a seed stage fintech fund investing in visionary entrepreneurs making financial services work for all Americans.
