Clients are concerned advisors don’t have all the information they need to help them plan for health care in retirement, according to Peter Stahl, president of Bedrock Business Results. Unfortunately, they’re not doing much better on their own.
Stahl told attendees at Schwab Impact on Thursday that 85% of women and 70% of men are guessing at how much of their health care costs will be covered by Medicare. Only 2% of women and 5% of men actually asked their advisor about it.
It’s important for advisors to guide their clients through their Medicare decisions, Stahl said, because “Medicare is mandatory. It can be delayed or deferred,” but you have to claim it. Once clients file for Social Security, even if they file and suspend, they’ve already pulled the trigger on Medicare.
Part B premiums are paid out of clients’ Social Security benefits, Stahl said, but they’re based on the client’s salary from two years prior to claiming benefits. Stahl encouraged attendees to help their clients apply for reconsideration to have their premiums based on their current income, as retirement, loss of a spouse or divorce can all have a serious impact on income.
Clients generally have two options for Medicare coverage, Stahl said. They can use traditional coverage with Parts A, B and D and a Medigap plan to fill the holes in Parts A and B, or they can opt for a Medicare Advantage plan.
Stahl suggested advisors make a checklist of items to discuss with their clients regarding health care. Obviously, advisors aren’t health care consultants, he said, but “clients want to connect.” Advisors should help them calculate the potential costs and create a plan for income to pay for those costs.
They should also discuss using tax deferral to reduce the modified adjusted gross income used to determine Part B premiums. The problem for clients who have been faithfully saving in their 401(k) plans is that they have “80% to 90% of their income tied up in qualified plans.” Stahl suggesting looking at tax deferred products to shelter clients’ income.