Overcoming retirement fears

Around 60 percent of those surveyed described themselves as “terrified” of what health care costs could potentially do to their retirement plans. But one thing they did not do was turn to their financial advisors for help with this issue. In fact, a solid majority – 59 percent – of the respondents said that most financial advisors are “not equipped” to discuss retirement health care costs with their clients. Among those who had actually tried to get help from an advisor, though, the story was very different. The survey singled out those affluent individuals who had discussed health care costs in retirement with an advisor; two-thirds said that they found the conversation to be helpful or very helpful.

The gaps in understanding health care costs on the part of those who haven’t yet retired can be staggering. The Nationwide survey asked pre-retirees to estimate how much they expect to spending out of pocket each year on health care costs after they’ve retired. The average response was $4,300, which is woefully inadequate. According to a cost estimate calculated by Fidelity Benefits Consulting, a 65-year-old couple retiring this year is expected to need roughly $220,000to cover medical expenses throughout the course of their retirement.

Nationwide also asked those surveyed how much of their post-retirement health care costs they expect to be covered by Medicare. The respondents answered that they expected it to cover 69 percent of their medical bills. In actuality, Medicare covers only about 51 percent of the average retiree’s health care costs. It’s no surprise that 70 percent of those surveyed said they wished they understood more about Medicare.

There’s an important lesson here for estate planners and other advisors who deal with end-of-life issues. The affluent are not likely to broach the topic of health care costs with you; they’re not likely to see it as a topic you can help them with, and they may be a bit embarrassed to admit that the assets they have accumulated might not make them bullet-proof. A proactive advisor will take the initiative to discuss how these costs fit into an overall retirement plan.

These are difficult times for people worried about health care costs. The Affordable Care Act has changed the landscape for many insurance and health-related issues, and there has been a great deal of discussion about the future of Medicare and other entitlement benefits now enjoyed by the elderly. This provides a perfect opportunity for an advisor to educate them on the issues, and provide some invaluable peace of mind.