A large part of your job is advising clients to take action in their best interests. While there are certainly many rewarding financial client planning meetings, there will always be a few uncomfortable ones. Talking to your clients about long-term care insurance and, ultimately, death, is one of those meetings that no one wants to have, but are crucial for your clients in order to enjoy the autumn of their life.
Long-term care isn’t always needed, but the conversation around it is. Simply put, you need to bring up this subject if they don’t. You’re aware that it is in their best interest, you know that it has to be discussed, and it’s clear to you that their finances and lifestyle will be impacted if the dialogue doesn’t take place before it’s too late.
How to start the conversation
While approaching the conversation is difficult, you can always reassure them that many people don’t need long-term care and those that do don’t necessarily stay in it for the rest of their lives or for a long-period of time. It has to be made clear, however, that if they do need it and do not have a plan in place to pay, they will be sacrificing their financial security and quality of life.
This shouldn’t be just a passing conversation either, it should be a thoughtful, in-depth discussion of all the aspects surrounding long-term care. These are some questions you need to answer during these meetings:
- What happens if they need long-term care?
- Who will take care of what if they are admitted?
- What happens if a client dies while in long-term care?
- How do they plan on paying for it?
Questions like these may make you shift in your seat, but everyone is better off clearing the air and having the conversation. Try to think of a way to ease the atmosphere before or during these conversations. Think about providing food or drinks during the meeting or have the conversation outside on a pleasant day. Get creative with a way to lighten the mood around a somber topic. If nothing else, put yourself in a frame of mind that allows you to confidently approach the topic and deliver what your clients expect and need.
It also helps to have solutions in place within your practice, such as HALO, that allow you to have data points that can provide a dose of reality to the conversation.
Focus on the outcomes
Nick Dragan, a financial advisor with Mass Mutual, believes that education and technology go hand-in-hand to create the experience that clients now demand from their advisors.
The days of just selling products are over. It’s all about the counsel you provide – including education on a wide variety of topics such as LTCI. Technology and financial planning solutions become tools we use to provide the right advice that is quantitative, objective, and opens up the conversation of where things fit into their plan.
There may be more rewarding aspects to your job than having these conversations, but they are a necessary part of building a strong relationship with your clients. Not every client will be difficult and some might have no problem discussing it at all. Explain thoroughly why the conversation is necessary and why it is in their best interest and both parties will be satisfied with the outcome.
The greatest unknown facing financial advisors and retirees alike is just how long retirement will last. A close second is how much care your clients will need in their final years. While most people expect to have some care as clients age, the world of long-term care insurance planning is quite a bit different. We’ve assembled five issues that are on the minds of advisors when it comes to LTCI.
1. Long-Term Care (LTC) is becoming unaffordable.
Over the past decade, every type of health insurance has risen, but none so much as LTC policies. Certain states have different rules dictating premium increases, but in some places, increases have been over 100% in a single year. Astronomical increases like these make planning for long term care difficult as predicting them is akin to fortune telling. Tom Riekse, from LTCI Partners, LLC, agrees that this is a big challenge:
“[LTCI is] more expensive now, so most providers and clients approach it as part of a life insurance rider. We are trying to position it as education rather than a hard sell for affluent clients due to the costs.”
2. New Policies On The Market
As with any product, the market is full of choices. The question is, which policy is right for your clients? This can be a difficult decision, especially if made uninformed. There are several factors that go into deciding what type of policy to buy and all need to be considered carefully. Consult your clients before wading into the world of LTC policies to make sure you have a clear vision of what policies they would want.
3. Do Your Clients Have Enough Money?
If your clients don’t opt to have an LTC policy, they may consider paying out of pocket. This is most likely an unaffordable option for all but the wealthiest of your clients. There is the option of paying for a traditional and more affordable LTC policy, though these policies seem to be diminishing in popularity and don’t cover much outside of just the care. New “hybrid” whole-life policies seem to be taking their place but are anywhere from two or three times more expensive. Work with your clients to figure out what they can afford both now and into the future.
4. The Clients Themselves
Often, clients will be in denial about LTC. Some will say they won’t use it or will be reliant on Medicaid in the event that they do need extra funds to get them through. Needless to say, planning by denial isn’t really planning. Though it may be a hard topic to broach with your clients, push for them to consider LTC as a real possibility and work with them to purchase insurance or set money aside in the event that they need extended care.
5. Risk Assessment
Health, lifestyle, and genetics are all major factors in assessing clients risk later in life. This can be one of the trickiest aspects of planning for the need for LTC. Having an honest conversation around their level of risk and how to prepare for it, as it pertains to LTC, is important in securing financial security in their later days. HALO by Genivity can help with this process and provide customized, reliable data points for you to get the conversation started.
Planning for retirement requires planning for many scenarios and options. One element to consider is Medicare. In a survey by Forbes, 30 percent of Americans believed that home health care expenses were less than $417 monthly when in reality, the cost is closer to $4,000 a month, or $45,000 annually. To put this into perspective, a 65-year-old in 2016 expected to need approximately $270,000 in savings to cover at least 90 percent of their health care costs in retirement. While this may seem like a cost that will be impossible to cover, Medicare can be very useful in this case.
Apply for Medicare
Medicare is a federal program for U.S. citizens and legal residents of five years. Individuals who are over 65 years of age can apply to this program. Individuals who are under 65 years of age can also apply if they receive disability benefits from Social Security, are members of the Railroad Retirement Board, or who have medical conditions such as Amyotrophic Lateral Sclerosis (ALS) or End-Stage Renal Disease (ESRD).
To apply for Medicare, you have a seven month period. You have three months prior to turning 65 and three months after turning 65. You may also apply during the general enrollment period from January 1 through March 31. If you are accepted, coverage will begin July 1.
To re-apply for Medicare, make sure to do so before your policy expires. If you are uninsured for a 12-month period and re-apply for Medicare part B, you will be charged a 10 percent increase in your premium. In other words, if you re-apply five years later, you will witness a 50 percent increase in your monthly premiums.
For more guidelines, read more at Medicare.gov.
Medicare Part A
Medicare part A is also known as hospital insurance. This insurance covers inpatient care such as those in hospitals, skilled nursing care, or hospice services. This service does not typically require a monthly premium. However, this will depend on your circumstances. If you receive part A, it is very likely that Medicare part B will also be required.
Medicare Part B
This insurance is also called medical insurance and covers medical care that is necessary in outpatient settings such as doctor’s offices. It also covers ambulance fees and durable medical equipment such as wheelchairs. It is aimed at diagnosing, treating, and preventing healthcare conditions. A part of the preventative services includes lab testing and the influenza vaccine. This insurance policy requires a monthly premium, which in 2017 was approximately $134 a month. However, if you also receive Social Security benefits, this premium is deducted from your income.
Medicare Part C
Part C is also called Medicare Advantage. Private insurance companies run your insurance policy and determine the amount of money you will receive to cover your health expenses monthly, regardless of whether it meets the cost of your services. In other words, your policy can determine you will only receive $200 a month for your health care, even if your health care is $500 a month. To apply for this insurance, you will need to be enrolled in part A and part C. You get several options, however. Your policy can be a Health Maintenance Organization (HMO), Preferred Provider Organization (PPO), or a Medical Savings Account (MSA).
Medicare Part D
Medicare part D covers prescription drugs and also have a monthly premium like part B. However, there is a limited amount of money given to you for your prescription drugs. For example, in 2017 the limit was $3,700. If you reach that limit, you are required to cover the cost of your medication. If you have name-brand prescriptions, you are required to pay at most 40 percent of the plan’s cost. If you have generic prescriptions, you are required to pay 51 percent of the cost. However, it is important to note the coverage gap is expected to be phased out by 2020.
Retirement is a difficult topic to discuss when there are so many factors. However, with a basic understanding of how Medicare can help you with retirement, we hope this has given you a starting point. Medicare is important in maintaining your health in your older years. Your financial advisors can assist you in determining how Medicare fits into a retirement plan, which can ease your transition into retirement. Talk to your financial advisor today to determine which Medicare parts apply to you.
Genivity is here to help. We place emphasis on helping advisors with goal-based financial planning that incorporates health wealth factors to provide personalized reporting. Your health will greatly impact how you plan for retirement, and it is important you get that information in an easy to read manner! If you are interested in understanding how your health influences your retirement, ask your advisor for an assessment with Genivity’s HALO.