Affluent clients are confident about retirement plans, but not
medical expenses
Jun
26, 2018 @ 3:43 pm
Affluent older adults are worried about
what health care costs, including
long-term care expenses, could do to their carefully laid retirement plans. Yet
only about half of those who work with a financial adviser have discussed their
fears because they consider health care a personal matter, according to a new
survey.
Nearly three out of four (73%) older adults
list out-of-control health care costs as one of their top fears in retirement,
and 64% of future retirees say they are "terrified" about what health
care costs may do to their retirement plans, according
to the annual health care survey from Nationwide Retirement Institute released
Monday.
The results were based on a Harris Poll online
survey of more than 1,000 adults over age 50 with a household income of at
least $150,000. Although this is the sixth year of the Nationwide health care
survey, it is the first time that the Nationwide Retirement Institute has
focused on affluent adults, who represent a prime market for financial
advisers.
Despite widespread concern over health care
costs, 48% of older adults who work with a financial adviser have not discussed
the subject with their adviser. That marks a slight improvement from last
year's survey, which showed 54% of advisory clients had not discussed health
care costs.
"You can't adequately plan for health
care costs without discussing the topic," said John Carter, president of
retirement plans for Nationwide. "While often considered personal,
consumers and advisers need to broach the subject and accurately plan to ensure
health care doesn't negatively impact their retirement."
The second most commonly cited reason for not
discussing health care costs with an adviser was a perception that advisers
lack adequate knowledge on the subject. Nearly 40% of older adults who work
with a financial adviser agreed with the statement: "Financial advisers do
not know enough about health care costs," according to the survey.
The survey found that 78% of consumers expect
financial advisers to offer guidance on health care costs in retirement. To
help advisers have these conversations, Nationwide offers a free personalized health care
assessment tool that provides personalized cost estimates
to help advisers and clients estimate future medical and long-term care
expenses.
"There is tremendous upside potential for
advisers who want to grow their business and become a trusted resource,"
Mr. Carter said in an interview. "We have tools to help advisers educate
and communicate critical information in a professional, research-driven
way."
The survey shows that when people do talk with
their advisers, they feel more confident about their retirement plans and where
the money will come from to pay for health care expenses.
The Nationwide survey also found that while
nearly 90% of older adults plan to rely on Medicare to cover much of their
health care costs in retirement, a majority of survey respondents admitted they
don't know enough about how the government program works. In fact, many could
not correctly answer some basic questions about Medicare benefits.
For example, 53% of respondents did not know
that Medicare Part B, which pays for doctors' fees and outpatient services, is
not free, and 29% did not realize that Medicare premiums are not the same for
everyone. Higher-income retirees pay more. In
addition, nearly a quarter of respondents did not know there are specific
deadlines to enroll in Medicare.
"It's another huge opportunity for
advisers to be in that niche to answer those questions," Mr. Carter said
The survey found that most future retirees are
taking steps to save for health care costs in retirement, including building up
their savings accounts (59%), investing (56%), increasing their 401(k)
contributions (46%) and paying off credit card debt and loans (36%).
But while nearly half of employed affluent
adults have access to a health savings account (HSA) through their employer,
only 30% contribute to the HSAs, and few fully leverage HSAs' triple tax break.
Of those who do contribute to an HSA, only 10% maximize the accounts by using
them as long-term savings vehicles. Unused HSA funds can be rolled over from
year to year and can be used tax-free to pay for future health care costs in
retirement, which in turn can reduce future income taxes and possibly reduce
future Medicare premiums.
Advisers can help clients by creating
personalized health care costs estimates, projecting savings needs for those
costs and recommending funding sources such
as HSAs, insurance, Social Security and Medicare. Advisers should also suggest
that clients discuss potential health care needs and costs with family members
to create a truly holistic retirement plan.
No comments:
Post a Comment