Filed Under:Health Insurance, Individual Health

How to personalize health care costs in retirement

Our job is to help clients navigate life’s challenges so they can have the peace of mind they have worked hard to achieve. The topic of how health care costs play a role in your clients’ financial future runs a close second behind the general sentiment of retirement saving: “I do not want to run out of money.” There are many reasons why the future of health care costs is a big question mark, which I will not discuss in this article. Rather, I will speak to the overall issues and strategies to help you execute accounting for health care costs in your practice, so your clients may benefit while your business grows.

See also: These 5 charts predict what retirees will pay for health care over the next 10 years

The challenge when it comes to properly incorporating clients’ health care costs in their plans is that it is hard to estimate, because it depends on a person’s health and longevity. Clients are not usually too excited about calculating when they are going to die, but there is research available to help assist this conversation. One company in this field is HealthView Services, which helps financial advisors forecast health care costs for their clients. The data used in the company’s programs come from more than 50 million actual health cases. The chart below displays information for a fit 65-year-old couple retiring in 2015 regarding what they may expect for their future health care costs.

Cost Projections for a 65-Year-Old Couple

       

 

Age 65

Age 70

Age 75

Age 80

Age 85

Overall Cost

Annual Cost

$6,999

$8,498

$10,345

$12,304

$14,530

$266,589

Monthly Cost

$583

$708

$862

$1,028

$1,211

 

Future Dollar Cost

-

$9,851

$13,902

$19,169

$26,243

$402,034

*Source: www.hvsfinancial.com/PublicFiles/Data_Release.pdf

This covers only the general costs and does not include dental, vision, copays, and other out-of-pocket expenses. When you include these in the estimates, the average cost rises to $394,954. Also, note the rise of the cost of care in the later years. When clients are planning, they often simply average the cost over their lifetimes rather than inflating it at a higher rate on the backside of life. So the big question is, what can you do with this information to educate your clients and grow your practice? The following is an outline to help you tackle this topic.

Health care costs strategy

1. Intelligently educate your clients and prospects.

Gaining a deeper knowledge of this topic is the natural first step so this can be passed along to your clients and prospects. Using the tools that are out there, the advisor can personalize the future cost for clients, so that they can see for the first time what their health care costs will look like.

2. Build a custom solution that incorporates these health care costs.

Taking this information and incorporating it into your clients’ financial plans is complicated. This is why you have to rely on the different tools out there to help you make these calculations. There are many great financial planning tools. These tools have the capabilities for you to layer in the proper health care costs and inflate them based upon the client’s age. This is critical for mapping out a plan that is closer to what the client will experience in his or her lifetime.

The second piece to the planning is the vehicle you select for your client. Make sure that when you are recommending an overall allocation, your plan can keep up with the pressure of inflation.

3. Monitor your clients’ health on an annual basis.

Though this may seem obvious, not all advisors implement this. When you are doing annual reviews with your clients, make sure you ask them if anything has changed regarding their health. As their advisor, you want to know, so that if changes need to be made to their assets, you can be ahead of the situation.

As we look into the future, this topic will continue to evolve and become ever more important to your clients and the future success of your business.  and ever more important to your clients and to the future success of your business.  

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Nichole Morford

Nichole Morford
Managing Editor

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