Many producers are already aware that health and wealth are intricately linked. A person’s health status and health care expenditures largely determine how they will spend their retirement and whether there will be enough money to finance the entire span. But exactly how to factor health care into retirement planning is still a bit elusive for insurance advisors. When should the conversation begin?
What types of programs and messages should clients receive from their advisors about health care? Should advisors help their clients lead healthier lives?
“In a lot of ways, health care has been left outside the whole financial planning process,” said Ruth Papazian, chief marketing officer with LPL Financial. “There is no single source for a person to go to.”
Instead, she said, clients are often left on their own to patch together what they need from Medicare, private insurance, their own funds, and friends and family. Many don’t address this need until they are face to face with it — which is usually at the time of illness.
No. 1 concern
But health considerations consistently top most clients’ fears about retirement. Health issues affect the overall quality of those years and raise the question of whether assets can withstand the onslaught of any health-related costs. There is good reason to be concerned: According to Fidelity Investment’s annual survey of health care costs, a 65-year-old couple retiring today can expect to have $250,000 in out-of-pocket costs not covered by Medicare – before long term care is even factored into the equation. The National Center for Policy Analysis estimates that by 2024, medical costs will account for half of seniors’ total yearly consumption.
“We have to answer the question for our clients, ‘What are we going to do about health care?’” said Craig Brimhall, vice president of Retirement Wealth Strategies with Ameriprise Financial. “It’s a major expenditure to the point of being debilitating for many people.”
Yet advisors may not be experts on the topic. They may not know which Medigap policy is the best option for covering health expenses, or have an opinion on which long term care insurance riders are needed.
“An excellent financial advisor will take into account services that he or she may not necessarily provide,” Brimhall said. “We as a company do not sell health insurance products, but we need to understand how that fits into the overall retirement picture.”
When advisors take health costs into account, they have very different conversations with their clients, say experts. They can look at a client’s financial picture holistically.