When it comes to retirement planning, a majority of customers consider health care coverage to be a critical part of their overall strategy. But most say they have limited understanding of health care issues today, and a small minority understand the importance of long term care protection. Those are among the findings of a new research study entitled “2013 Retirement Planning Study,” sponsored by Nationwide Financial and conducted by Summit Professional Networks and ThinkAdvisor.

The study is based on the responses of 1,016 certified financial planners, who participated in an online survey in July. The purpose of the survey was to provide an understanding of retirement planning among financial advisors: the level of understanding among customers about retirement options; the level of preparedness for retirement among those customers; plans among customers on when to retire and when to begin collecting Social Security; and how retirement planners best keep up on the information they need to advise clients.

The good news from the survey is that while most customers have very limited knowledge about the things that will impact them, they are open to ideas. That is good news for retirement planners, who will find a very receptive audience to the advice they can dispense.

It comes as no surprise that health care scored as such an important, and misunderstood, issue by customers. The health care industry and insurance industry are undergoing dramatic change. Every week sees new headlines and news stories about the Affordable Care Act that seem to reverse the previous reports. And no one seems to know where it is all really heading.

The result is that health care is front and center on the minds of soon-to-be retirees and retirement planners alike.

According to the study, 57 percent of financial advisors surveyed say that a majority of their clients are including plans to pay for health care, including Medicare, as part of their retirement planning. But health care is the one area where customers say they have the least knowledge among several top retirement issues. The other top topics surveyed: planning for longevity, spousal protection, Social Security, and long term care.

Asked how well customers understand health care issues that impact them, 57 percent of advisors said customers are “somewhat knowledgeable”; 21 percent said “knowledgeable”; and 3 percent said “very knowledgeable”.

Clearly health care is one area where retirement planners really need to focus. That is especially true in light of the pending Affordable Care Act which will take effect on January 1, 2014. There has been a great deal of public confusion over what the Affordable Care Act means for currently insured Americans as well as the soon-to-be insured. And no one seems quite sure if it will impact Medicare, or if it will drive up health care costs overall.

The result is that “there is a lot less confidence in advising on health care,” said Stephen Haidt, CEO of Retirement Advisors Inc., in Mobile, AL. “Clients expect a lot more precision than we can provide. How do you predict these costs?”

Haidt’s view is confirmed in the survey data. Only 28 percent of responding retirement planners said they feel very prepared to develop strategies for their clients to pay for health care. Even worse, only 17 percent said they feel very prepared to help clients estimate what their client’s health care costs are likely to be.

While Americans can take early retirement at age 62, most retirement planners (57 percent) say their customers for the most part won’t. A larger majority (77 percent) say their clients also plan to spend the same or less in retirement.

Americans are also keenly aware they are living longer, and that is reflected in the survey data. After health care, the second priority cited by planners as very important to their clients was planning for longevity (cited by 42 percent), followed by spousal protection (cited by 39 percent). Social Security dropped to 29 percent, and long term care followed with 14 percent.

“A lot of people have a little understanding of each, but not how they all fit together,” Haidt said.

The one topic that retirement planners feel most comfortable advising their clients is on the topic of Social Security. Nearly half of survey respondents said they feel “very prepared” to discuss the topic with their clients.

That isn’t surprising, according to Haidt. “People are less afraid about what’s going to happen to Social Security. People near retirement aren’t concerned. They know there is nothing in the works to change it right now,” he said.

While younger generations may worry if Social Security will be available to them, older adults for the most part are not, the survey reveals. Eighty-one percent of advisors said their clients are counting on Social Security being part of their retirement portfolio; and only 26 percent of advisors said their clients expect to see reduced Social Security payments in the future. 

The other key findings of the survey centered on how retirement planners obtain information they need to best advise their clients.

Most importantly, advisors would like to find better ways to communicate the importance of various retirement options. This is especially true with health care and long term care, the two issues which customers say they feel the least knowledgeable.

Despite the reliance on digital resources in the workplace today, the largest percentage of advisors said they still preferred printed communication from financial services providers (cited by 32 percent to 36 percent, depending on the topic at hand). That is followed by financial service provider websites (cited by 26 percent to 30 percent).

The least popular sources for retirement information overall are media websites (cited by 12 percent to 17 percent). Despite that, news sources (either print or online) are the most popular sources for information on Social Security benefits, programs, and changes, or for information on health care issues.

When it comes to clients, there is no substitute for face-to-face communication, Haidt said. “Clients don’t want retirement planners to just throw information at them, and leave it up to them to figure it all out.”