Health Care Worries Grow as Investors Approach Retirement

The problem, according to Cerulli, is that there are very few tangible health care solutions for investors entering retirement

Health and health care costs are two of investors' five top concerns, Cerulli reported. Health and health care costs are two of investors' five top concerns, Cerulli reported.

The cost of health care has become a chief economic concern among retail investor households in the U.S., according to new research.

According to research from global analytics firm Cerulli Associates, two of the top five overall household concerns are the cost of health care and the “health of myself or family members.”

“Investors will certainly be reminded of the issues surrounding health care in the U.S., because the repeal or replacement of the Affordable Care Act passed in 2010 will be a major impetus of the GOP candidates,” Shaun Quirk, senior analyst at Cerulli, said in a statement. “No matter the party lines, rising health care costs affect millions of individuals, and will grab front-page headlines throughout the 2016 campaign season.”

Cerulli finds that the cost of health care and “health of self and family” become progressively important topics as investors near retirement, with the data indicating a significant increase in importance between the Generation X and baby boomer generations.”

According to Cerulli, 7% of Gen Xers indicate cost of health care as important, compared with 13% of boomers. The same goes for those indicating “health of self and family” as important – 8% of Gen Xers compared with 12% of boomers.

Analyzing the data even further, Cerulli finds there is a far greater concern regarding health care among those investors with less than $1 million in investable assets.

“This is a key inflection point above which the cost of health care as a household’s greatest economic concern drops significantly,” according to the report. “As investors accumulate investable assets in excess of $1 million, the cost of health care as a concern falls from 21% to 7% among all households (20% to just 5% among Generation X, and 23% to 8% among baby boomers).”

The problem, according to Cerulli, is that there are very few tangible health care solutions for investors entering retirement. Cerulli’s data highlights an area of opportunity for financial services providers who are willing to address this problem.

“As investors struggle to gain perspective on their own health care costs in retirement, they will turn to trusted professionals to help guide them through this important topic,” Quirk said in a statment. “However, many industry experts believe that planning for health care is nearly impossible for investors across all asset tiers, given the limitless number of variables that can affect the amount of money a retiree needs in the future. Financial planners in particular do not want to broach the subject because it will often challenge the established financial plan and illuminate possible shortcomings surrounding their own lack of expertise in the area.”

If providers are going to offer “comprehensive planning,” then, according to Cerulli, the health care topic needs to be part of the process.

Because concern over health care costs is so high among investors below the $1 million mark, Cerulli suggests providing education on available solutions before investors reach the $1 million inflection point.

According to Cerulli, direct providers in particular have a significant population of clients that indicate the cost of health care as their greatest economic concern.

“Offerings related to health care topics can differentiate a firm’s capabilities and address investors’ pain point,” the report says.

Cerulli believes that providers need to engage other members in the community and partner with health care experts that specialize in this area to provide more in-depth service.

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