As healthcare expenses rise in retirement, it’s critical that partner agents and advisors talk about healthcare as an essential expense and guiding factor in retirement planning with their clients. The increasing costs of healthcare in retirement compounds the retirement income challenge which increases concerns among pre-retirees and makes it difficult for financial agents/advisors to plan.
Why have the healthcare conversation with your clients now?
There are several contributing factors that are leading the healthcare conversation urgency. These include:
- Rising cost of healthcare expense and the historical healthcare cost inflation outpacing general inflation.
- Shift in retirement income and retiree health care responsibilities from employee sponsored defined benefit plans and retiree medical insurance plans to individual personal savings and private insurance.
- Age of retirement is changing. Individuals are retiring earlier than 65 — average age of the American retiree is 61. This means these indviduals do not qualify for medicare in the early years of their retirement.
- Longevity of retirees and better medical care have increased the focus on medical and non-medical living expenses as well.
These factors when paired with decisions about when to stop working, when to take Social Security, and how to generate cash flow in retirement all factor into how your clients can prepare to meet healthcare expenses in retirement.
How can agent or advisor lead the conversation around healthcare cost planning with their clients?
Healthcare Costs Planning Question to Ask Your Clients
We highlighted income need revolving around a guaranteed essential expense – the healthcare cost during the duration of a client’s retirement and life span. Agents and advisors can start this conversation and continue it by asking several leading questions. The first being: “If we were to carve off a piece of your portfolio to cover this guaranteed essential expense, how much of the income generated would you like to have guaranteed?”
From there, you can ask your clients three questions with regards to their retirement income.
- How do you plan to invest for growth?
- How do you plan to protect your assets?
- How much income would you like to take and when?
Let their answers be your north star in the decision tree and product recommendations. Of course, one of the best places to achieve guaranteed income would be an annuity with an income rider or annuitization, etc.
Once you’ve gotten your client into a healthcare planning mindset, you can leverage different tools and resources to assess health risks, income need, and review long term care recommendations.
Tools and Resources for Healthcare Planning
One of the tools that can help agents and advisors assess their client’s healthcare costs and even plan for unforeseen expenses is the Nationwide® Health Care Cost Assessment Fact Finder 2020, a 3-part 15 question tool that looks at health history, lifestyle, and a metro area for retirement. The subsequent report generated by Nationwide is one tool that provides agents and advisors with an assessment based on actuarial health profile combined with where a specific person would like to retire geographically. This will be an informative tool to help the agent/advisor and client understand their health profile, health risks, estimated life expectancy, risks, and health care costs in retirement. Based on this information, a financial professional can back into a long-term care recommendation. Healthcare costs are broken out into Medicare, out-of-pocket, and long-term care expense categories.
As you start to have these conversations withy our client, DMI can help. Explore planning for healthcare costs, including planning for unforeseen healthcare expenses, and review Medicare at our DMI University Planning for Healthcare Costs Webinar; Register today.