A piggy bank in a doctor's hand (Photo: Thinkstock)

Back in 2018, the U.S. Census Bureau made headlines with a series of shocking population projections, including a rise in the ratio of older to working-age adults. The Census Bureau predicted that by 2020, our country would have approximately 3.5 working-age adults for every person of retirement age. Now that 2020 is here, financial advisors can take steps to position themselves as more valuable partners to both of those age cohorts by empowering them to calculate, and plan ahead for, their expenses in retirement with greater precision.

As more baby boomers reach age 65, and lifespans continue to increase, one of the biggest concerns for retirees and workers alike is the cost of health care during retirement. Fidelity’s most recent annual Retiree Health Care Cost Estimate predicts that a 65-year-old couple retiring in 2019 could spend up to $285,000 on health care and medical expenses throughout their retirement years, up from the $280,000 estimate in 2018. Fidelity also estimated that single men and women who retired last year may incur up to $135,000 and $150,000, respectively, in health care and medical expenses in retirement.

The capability to work with clients to determine how much they will likely need to cover health care costs in retirement, given their individual circumstances, goals, family health history, etc. — and then incorporate this data into a detailed financial plan that shows clients how they can save to meet both health care expenses and their life/financial goals in retirement — is a key competitive differentiator for advisors.

According to Fidelity, a 35-year-old couple planning to retire at age 65 in 2049 could save $287,846 by that time using health savings accounts (HSAs). Financial advisors play an important role in helping married and single clients figure out how much they personally would need to save for health care expenses in retirement in various scenarios, and enabling them to make adjustments in real time as needed.

Fidelity’s scenario requires a married couple to save $2,820 annually in a health savings account for 30 years. But depending on a 35-year-old couple’s current expenses and goals, and the health savings accounts available to them, they could save more or less over that time frame. Different market scenarios, including the possibility of serious changes to the U.S. health care system, or the necessity of using HSA savings for present medical expenses, can also affect planning strategies for covering health care costs in retirement.

Simplifying the Planning Process

Fortunately, in 2020, the personalized, interactive financial planning tools for giving clients a more accurate picture of how much they would need to pay for health care in retirement — and enabling them to begin making progress as part of a comprehensive, holistic financial plan — are no longer the stuff of science fiction.

In today’s wealth management marketplace, advisors can utilize digital solutions that enable clients to obtain a more granular idea of health care spending in retirement. Some fintech providers have forged partnerships with health care analytics firms in order to integrate their smart data into the financial planning tools they offer. For example, certain modern planning applications provide clients and prospects with a guided, self-directed retirement planning workflow where they can enter personal details about their health, goals, location and other factors within a secure ecosystem. Then, using advanced application programming interfaces (APIs), the smart analytics tools from health care data providers create models which comprehensively demonstrate a client’s or prospect’s likely health care expenses in retirement, alongside projected leisure and living expenses during their “golden years.”

Within minutes, advisors have powerful insights at their fingertips to help them begin meaningful planning conversations with clients and prospects, and work with them to craft plans that address their primary retirement concerns.

The 2017 Capgemini World Wealth Report reported that 90.1% of high-net-worth investors prefer a combination of self-directed and advisor-directed resources to help them through every step of the financial planning process. The planning solutions that advisors can incorporate into their practices today provide investors with their desired digital experience, while also empowering advisors with the tools and insights to help clients of all ages achieve a financially secure retirement.

— Check out Top Women in WealthTech 2020: Angela Pecoraro of Advicent on ThinkAdvisor.


Angela Pecoraro is CEO of Advicent, the provider of NaviPlan, which supports over 140,000 financial professionals across more than 3,000 firms worldwide.