Many of your clients are dreaming of retirement. It’s the final phase of their life that they’ve been diligently working toward and saving for. Suffice it to say, it would be unfortunate if something derailed that dream, especially if the reasons it was derailed were preventable. However, that predicament is happening more and more across the United States. The culprit? Rising health care costs.
Planning for health care costs – effectively
Even with good insurance, there’s no telling how a health episode may spiral out of control and leave your clients’ wealth in jeopardy. It’s not likely that something common like the flu or a broken bone will sink your clients’ chances of retirement, but rather it’s the chronic illness or preventable diseases that could cause your clients to hemorrhage savings.
Diabetes, stroke, heart disease all have long-term consequences and can eat up a large portion of retirement savings. Talking to your clients about their health must be part of your strategy in talking about their funds for retirement. These can be uncomfortable conversation to have, but need to happen in order to attain the best outcome for your clients’ wealth. It’s not just chronic, preventable diseases either. Genetic components often play a role in what type of illnesses develop and how serious they are. With Genivity’s HALO assessment, we can tell you more about your clients’ risks and, more importantly, the amount of money it may cost them.
Help your clients make the most of their retirement
Money is a finite resource and needs to be managed as such. The last thing anyone wants is for a retiree to re-enter the workforce because their medical costs have depleted their funds. The best way to avoid this scenario is talking about it today. There’s no magic bullet to disease and no one can tell the future perfectly, but there are things you can do today to make sure your clients vision of retirement isn’t derailed by health care costs.
There are certain professions that come with high levels of trust. Doctors, Lawyers, and even barbers need to be trusted by their clients to make sure the outcomes are positive. As a financial advisor, you’re right up there with the most trusted of professions. After all, what could be more important than managing assets and making sure there’s enough money to last into retirement?
How the advisor’s role is changing
Baby Boomers will soon make up the largest cohort of retirees in the nation. They will also be the wealthiest members of society and that wealth will need oversight. The role of the financial advisor is changing from simple “consultant for hire” to a member of close circle of trusted individuals. In situations where you have high net worth retirement accounts, you may find yourself answering questions and consulting on situations that you never dreamed of. Wearing the hat of not only financial advisor, but other roles that deal with family, health, money and all the details that come with it. As your clients age, serious life events, familial issues, medical problems, are certainly in store for you. While these undoubtedly can be intimidating, remember: make decisions for your clients as if it were your own money. How would you like your finances handled in tricky situations? While this may not be perfect for every situation, it’s a good rule of thumb to build and retain trust with clients and their families.
Build relationships with the family
Spouses, children, friends and other family members are relying on you to make sure that their loved one’s assets are around for the intended recipients to enjoy or even survive off of. It’s no small task nor are they decisions to be made lightly. Who knows how many people your management will affect? It’s becoming strikingly evident that the role of the financial advisor for aging clients is the role of trusted confidant. Someone who can advise on multiple situations and understand how they affect wealth and happiness in the sunset years, while understanding the impacts on those in their will and other recipients of their money. Building trusted relationships with your client and their family will be a pivotal part of your practice moving forward. Make sure you’re up to the task of taking on such responsibilities before you find yourself in too deep.
Much of the financial world has changed dramatically over the last 30 years. Stocks and bonds, IRA’s and even Social Security are far different today than they used to be. It should come as no surprise, then, that retirement planning needs to change from its traditional methods to strategies more adapted to our modern world.
Pitfalls of traditional planning
The rule of thumb used to be that a withdrawal rate of 4% would suffice retirement needs. Now experts are saying that this might not be enough given various states of healthcare and the U.S. economy. Conventional financial planning is no longer working, so as a financial advisor you need to be thinking about a Brave New World when it comes to managing your clients’ wealth. Stock buy-backs are at an all-time high, inflation is projected to increase, and as we’ve mentioned before, health-care related costs are surging. Planning with today’s numbers will not suffice for future expenses. Adding extra padding to any and all health-care related planning should be your norm. We are living longer than ever, but we’re also spending more than ever. These health care costs will impact how far their money goes in their golden years. On the flip side, one of the benefits of modernity is that we can project what kind of health care your clients will need in the future and how much it will cost, a simple hedge against ever increasing expenses.
How to refresh your planning strategies
What should be the strategy moving forward for your clients then? While save often and save early is undoubtedly the most effective and straightforward strategy that you can recommend to your clients, you can also leverage the technological advancements and solutions available to make better projections for how much money your clients truly need to save for retirement.
From portfolio risk analysis tools to our own HALO health and longevity optimizer solution, there are many data-driven solutions available to advisors now that can move the needle for improving your overall client recommendations and relationships.
When it comes to building those relationships, it’s also important to have frank, honest discussions with your clients about how they see their retirement unfolding. The lifestyle they have imagined may not line up with the reality of their financial situation or projected wealth in retirement. Gone are the days of figuring out retirement as it happens, a plan needs to be put in place and adhered to if your clients want retirement to run smoothly. This new era of financial planning is sure to be challenging, but it’s also an opportunity to give your clients peace of mind and tools to help them make the most out of the final years of their life.
The cost of skin cancer is no small expense and Americans of all walks of life should have plans in place to pay for it. Skin cancer treatment costs have risen significantly and could be a financial burden to those who are on a fixed income because of its sometimes lengthy treatment. Given the widespread nature of this disease, it should be assessed seriously as a potential medical expense.
Awareness is the First Step
As with almost all illnesses, the cost of treatment depends on the severity of the diagnosis. Simple surgery in a clinic or hospital can often take care of skin cancer but it can also have far more in-depth treatment and, therefore, expense.
Lowering your risk for skin cancer is fairly easy: covering up, wearing sunscreen and hats are simple things your clients can do to decrease their risk. Given that many retirees enjoy traveling in their later years, especially to sunny, warm climates, adding a reminder of the cost of skin cancer and what they can do to prevent it might not be a bad idea.
Planning for the Cost of Skin Cancer
Depending on your clients’ lifestyle or genetics, the likelihood for skin cancer could be high. It’s important to ask questions around family health history and environmental factors, such as those included in the HALO assessment, to properly assess if your clients should be actively planning for skin cancer treatment.
Even if all signs are good for being “low-risk,” it’s still an incredibly common form of cancer and should be kept in the back of your mind as potential expenses for your clients.
All diseases require preparation, planning and expense management. Skin cancer is no different. Given its dramatic increases in expense and diagnosis, talk to your clients about their plans to pay for it, even if they are low-risk. No one regrets having the extra money that they don’t end up using and if they do need it, they are prepared for the extra costs of care.
When we think about long-term care in the United States, there are several diseases that come to mind. Cancer is often at the top of this list, similarly, chronic diseases such as diabetes or arthritis can cause people to be trepid about their future health care spending. But an often overlooked and sudden cause of long-term health expenses is having a stroke. The cost of stroke is high for many Americans and it’s only getting more expensive.
Why stroke costs are rising
The reason strokes can cause such financial hardship is because they come unexpectedly. While diseases such as cancer generally have a progression and time to adjust, strokes can be sudden and the amount of damage they cause can be immense. Loss of senses or immobility can happen in the snap of the fingers, leaving almost no time to prepare.
The question is, how does one expect the unexpected? While you are most likely not a health professional, that doesn’t mean you can’t have honest conversations with your clients about their health. Prioritizing their wellness now can save them tens of thousands of dollars in the future and postpone their need for long-term care.
How to better plan for clients’ long-term care costs
Such a topic can be sensitive, but numbers speak louder than most anything. Simple financial analysis and basic research can show both the risk for a stroke and the amount of money it could cost your client. Likewise, the sudden nature of strokes can be a great motivator for your clients to examine their lifestyle choices.
Genivity’s HALO report can also help take personal data from your clients, such as their health and family history, and give clients an idea of what their health care spending could look like in the years to come.
No matter how you decide to approach the topic, if you have a client who is making unhealthy lifestyle decisions, keep it in mind when calculating their future spending needs. Though this can be a tough topic to discuss, a cost analysis doesn’t lie. If you feel comfortable enough with your clients, approach them about the subject and use their calculated future health care spending as the impetus for such a conversation.
Heart disease is not only the leading cause of death for both men and women, claiming 1 in 3 American lives, according to the American Heart Association, it’s also a leading cause of disability. So how can you, as a financial planner, help protect your clients from these risks?
As part of Heart Health Awareness Month, we at Genivity have broken down some real results from our HALO Planner (Health Analysis & Longevity Optimizer) to help demonstrate how much understanding your client’s heart health risk can affect their financial plan and goals.
For each of these HALO Planner scenarios, we used a 50-year-old woman with a healthy BMI who is a non-smoker and does not exercise regularly. She wants to retire in Florida at age 65.
No Family History of Heart Disease
In this instance, the client taking the assessment had the above characteristics and no family history of heart disease.
Did you know that the median cost of 3 years of elder care in Florida ranges between $409,560 and $2,538,336 depending on level and type of care?
OOP costs in retirement = $274,394 (many active years)
The cost of the above scenario ranges between $846,672 – $1,056,438, depending on level of care.
While the client will live a long and healthy life, it’s important to note that her out-of-pocket expenses will be higher strictly due to longevity and having more years where she’ll be spending on health costs.
Family History of Heart Disease
For this scenario, the client does not yet have heart disease, however, she does have a strong family history of the chronic condition. Here’s how her longevity, elder care, and out-of-pocket care costs numbers stack up:
Longevity: 95 years
Did you know that the median cost of 6 years of elder care in Florida ranges between $425,574 and $2,637,589 depending on level and type of care?
Out-of-pocket care costs (in retirement) = $210,907 (nearly the same as above, however, with only half the active retirement years)
The cost of the above scenario ranges between $1,204,192 – $1,367,599, depending upon the level of care.
Though her longevity in this case in two years shorter, she’ll have more out-of-pocket expenses and in elder care costs due to a long life with potential health concerns. It’s critical to plan for the possibility that the client will get heart disease in her lifetime, but potentially not until later in life, which increases the number of years in elder care.
A conversation about disability insurance might also be helpful. If your client is healthy now, getting disability insurance could be a smart idea as it will replace some of their lost income if she ever become disabled by heart disease or another condition and can’t work.