Despite the uncertain financial and economic environment last year, Americans continue to contribute to their IRAs, and those Americans who work with advisors are more likely to open, contribute, or consider an IRA, according to a new survey by Fidelity Investments and National Financial, Fidelity’s clearing arm. The survey found that six out of 10 IRA owners (60%) either have already made a contribution to their IRA for 2007, or are planning to do so before the April 15 deadline. One-third (32%) of the respondents who are saving for retirement also increased the amount they’re putting into their IRAs over the last 12 months, the survey found. The survey also found that 71% of Americans who work with an advisor own at least one IRA, compared to 41% of all Americans. Also, 74% of IRA owners who work with an advisor indicated they had taken some action over the last year to better prepare for retirement as compared to 62% of all IRA owners.
Meanwhile, Fidelity Investments’ latest healthcare cost estimate, released in early March, has found that retiree healthcare costs continue to rise. A 65-year-old couple retiring in 2008 will need approximately $225,000 to cover medical costs in retirement, according to Fidelity. That is a 4.7% increase over the 2007 estimate of $215,000. Since the healthcare estimate was first calculated in 2002, the number has risen a total of 41%, with an average annual increase of 5.8%, Fidelity says. As in past years, the 2008 estimate assumes individuals do not have employer-sponsored retiree healthcare coverage and includes expenses associated with Medicare Part B and D premiums (30%), Medicare cost-sharing provisions–co-payments, co-insurance, deductibles, and excluded benefits (39%)–and prescription drug out-of-pocket costs (31%). It does not include other health-related expenses, such as over-the-counter medications, most dental services, and long-term care, Fidelity says.
Speaking of which, more information on long-term care is available in the recently published 2008 Long-Term Care Insurance Sourcebook from the American Association for Long-Term Care Insurance. “So much changes in long-term care from year to year that it’s vital to have the latest and most relevant information,”said Jesse Slome, executive director of the Association, in a statement. The Sourcebook provides current cost averages for home care, assisted living, and nursing home care in major metropolitan areas. The results of industry studies undertaken by the Association are included. “For the first time, we report industry data on the youngest policyholders to experience a long-term care claim,” Slome says. The Sourcebook also reports that total claims paid in 2007 were $3.5 billion, a $200 million increase over the prior year, and that the largest claims currently being paid exceeded $1 million for a single claimant.
Speaking of medical costs again, Health Savings Accounts (HSAs) are a perfect fit for advisors because 50% of HSA account holders do not spend the funds in the account and are looking for investment solutions, Reggie Karas, senior VP of HSAs at Millennium Trust Company, told attendees at the Securities Industry and Financial Markets Association (SIFMA) retirement conference in Washington February 28. Karas said a “large segment of the HSA market is in the advisor’s existing targeted client base,” but advisors must get educated about HSAs. The Treasury Department predicts that HSAs will hold $75 billion in assets by 2010, Karas said.