Savings aren’t the only thing that can compound over time. Financial advisors need to remind boomers that the cost of health care can compound, too, suggested Ron Mastrogiovanni, president of Healthview Services Inc. The Danvers, Massachussetts, company produces software that financial firms can use to forecast clients’ health care costs in retirement.
“Today’s advisors need to step back from money management and educate clients on the new realities of retirement,” said Mastrogiovanni, whose experience as a co-founder of FundQuest involved providing wealth management solutions to financial institutions. “Health care costs should be part of the equation.”
Medicare isn’t the financial panacea it may appear to be. As ThinkAdvisor.com’s Insurance Editor Allison Bell wrote in mid-May, “Younger people and health care policymakers tend to talk as if Medicare is a magic wand that makes patients’ health care costs disappear. Insurance agents and financial advisors know that the opposite is true.”
Citing a new Commonwealth Fund study of Medicare enrollees’ actual expenses, Bell reported that out-of-pocket spending on acute care and long-term care averaged $3,024 per person last year. For a typical couple with household income of $65,000, out-of-pocket health care expenses added up to $6,972, or 11% of their income.